Budget Reconciliation 2.0
With the 2026 midterms on the horizon, House Republicans are eyeing a second reconciliation package as a key vehicle to advance President Trump's agenda—reviving sidelined provisions and narrowing focus to maximize political and fiscal impact.
By: Tony Roda, Williams & Jensen
The Republican-controlled Congress struggled a bit to deliver to President Trump his One Big Beautiful Bill by July 4, but in the end the legislative process and politics worked much as I had expected. On July 4, President Trump signed H.R. 1 (now Public Law 119-21) into law.
Throughout the legislative process in the House and Senate, Democrats raised objections and offered amendments when permitted to do so, but they were shut down in the one-sided, partisan reconciliation process, which both parties have used over the years. In addition, some Republicans also objected to certain provisions, and many of them received concessions and changes to the provisions or promises of some future legislative or administrative action.
What comes after this all-consuming effort is now coming into focus.
House Speaker Mike Johnson (R-LA) already has indicated that he plans to pursue a second reconciliation package beginning this fall. The Speaker recently said, “It will not be as big. I hope it is as beautiful.” What may disrupt this plan is the need for Congress to focus on government spending and annual appropriations bills once they return to session in September. Of course, the entire funding process could be short-circuited by adoption of a full year, Continuing Resolution, provided Republicans can secure the necessary votes in the House and Senate.
Regardless of how the government funding fight plays out, there is a strong desire among Republicans to find ways to put more points on the board for the President's agenda prior to the 2026 mid-term elections. A second reconciliation bill provides a path to do just that, and the Speaker certainly is genuine in his desire to do more than one such bill.
There will be Senate fatigue and resistance to another package, so budget reconciliation 2.0 initially will be driven by House Republicans working to get the President on board. If the Speaker can find agreement with the President, then it is all but assured that Senate Majority Leader John Thune (R-SD) and his Republican colleagues will follow suit.
What would this second package include? Likely the first thing the House Leadership and Trump Administration will do is look at the cutting room floor for items that did not make it into the first reconciliation bill because of procedural obstacles in the Senate or other reasons. A list is circulating of some 40 such provisions. Many of those could be revived with a different approach that focused more on the budgetary implications of the proposals.
Given all the policy areas that were tackled in the first reconciliation bill, the second package will be much narrower in scope and perhaps only involve four to five Congressional committees compared to nearly a dozen in the first reconciliation bill. It also would have to be a net deficit reducing package to have any chance to pass.
If a second reconciliation package gains traction, it is likely that some tax items would be included. In this vein, the public pension community once again will have to be vigilant in watching for any mention of the Unrelated Business Income Tax or any other problematic provisions for our plans.
Given health care policy is where most of the potential savings are located, it would be surprising if there is not a major health care component to a second reconciliation bill. Moreover, there is some overlap between health care and tax. For instance, it is unclear what, if anything, Republicans might do in relation to the Affordable Care Act's premium tax credits, which expire at the end of this year.
Regarding timing, if Congress takes a traditional approach to the reconciliation process, it is unlikely a second bill will be completed before the end of the calendar year. However, as we saw with President Trump's July 4 deadline on the first reconciliation bill, he can set the timeline to his liking.
Tony Roda is a partner at the Washington, D.C. law and lobbying firm Williams & Jensen, where he specializes in legislative, regulatory, and fiduciary matters affecting state and local pension plans. He represents the National Conference on Public Employee Retirement Systems and state-wide, county, and municipal pension plans in California, Colorado, Georgia, Kentucky, Nebraska, Ohio, Tennessee, and Texas. Tony has an undergraduate degree in government and politics from the University of Maryland, J.D. from the Catholic University of America, and LL.M (tax law) from the Georgetown University Law Center.