The House and Senate have both advanced budget resolutions, setting the stage for action on a major budget reconciliation bill in the coming weeks. Priorities for most local governments as budget reconciliation bills advance are:

• Protection of the tax exemption for municipal bonds, the primary tool by which local governments finance infrastructure projects.
• Preservation of the Inflation Reduction Act’s clean energy tax incentives.
• Minimizing cuts to safety net programs such as Medicaid and SNAP (food stamps). 

Local governments concerned about those issues should share these concerns with their congressional delegations as soon as possible.

Approval of a budget resolution is the first step in an effort to enact a broad budget and tax bill (a budget reconciliation bill) that implements the administration's priorities. It is a blueprint that sets broad revenue and spending goals and provides instructions to congressional committees to produce legislation to reconcile current law with those broad goals. The resulting legislation, a budget reconciliation bill, enjoys special treatment in the Senate. Unlike most bills, which need a two-thirds supermajority to clear procedural hurdles, a budget reconciliation bill only needs a simple majority. However, Senate rules limit what can be included in a budget reconciliation bill to provisions that have more than an incidental impact on revenue and spending, with the Senate Parliamentarian acting as the final arbiter of what meets that brief. 

The budget resolutions approved by the House and Senate Budget Committees take competing approaches to addressing the president’s priorities, reflecting an ongoing debate over whether to tackle increased immigration and Defense spending in one bill, followed by a second bill addressing tax and broader spending issues or to address them in a single bill. Of note, the president has endorsed the House’s one-bill approach, meaning that local governments need to act quickly to let their federal legislators know about their concerns and priorities.

The Senate Budget Resolution takes the two-bill approach. It instructs nine Senate committees to write legislation to provide $342 billion in funding over four years, with $175 billion for the border and immigration enforcement, $150 billion for Defense and $17 billion for the Coast Guard. Although the budget resolution provides instructions for only $4 billion in offsetting spending cuts, Senate Budget Committee chair portrayed that number as a floor, saying that all spending increases would ultimately be offset by mandatory spending cuts. These cuts would likely impact Medicaid, SNAP, and other health care and safety net programs. Notable for local governments, a chart to accompany the budget resolution released by the committee outlines steep declines in the broad “Community and Regional Development” category of spending, which could pose a threat to funding for programs such as CDBG and HOME.

The House Budget Resolution provides a blueprint for one bill. At the broadest level, it provides instructions for $4.5 trillion in reduced revenue over 10 years (technically 9 years since 2025 is included), offset by $2 trillion in reduced spending over the same period. The House Budget Resolution calls for $1.8 trillion in unspecified discretionary spending reductions over the next decade, which would be implemented via tighter annual discretionary spending caps setting limits on annual appropriations bills. Assuming that Defense would be spared from cuts and even see increases, that means the bulk of the $1.8 trillion in cuts would be focused on non-Defense discretionary spending. Non-Defense discretionary spending would need to be reduced by approximately 25% from current levels to meet the $1.8 trillion goal. It is likely that most of these savings would come from cuts to Medicaid, SNAP, and other similar programs.

The next step is a House vote on its version of the budget resolution and then House-Senate negotiations on a final budget resolution, and then final approval of the negotiated plan. After that, if both chambers approve their respective measures, the stage will be set for consideration of a budget reconciliation bill to turn the budget resolution’s broad revenue and spending goals into a budget reconciliation bill that makes changes to the tax code and funding for specific programs.