S. 4629

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 4629 Introduced in Senate (IS)]

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119th CONGRESS
2d Session
S. 4629

To prohibit the provision of Federal funds to State and local 
governments and school districts for payment of obligations, to 
prohibit the Federal Reserve banks, the Department of the Treasury, and 
other Federal agencies from financially assisting State and local 
governments and school districts that have defaulted on their 
obligations, and for other purposes.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

May 21, 2026

Mr. Young (for himself and Mr. Cotton) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
and Urban Affairs

_______________________________________________________________________

A BILL

To prohibit the provision of Federal funds to State and local 
governments and school districts for payment of obligations, to 
prohibit the Federal Reserve banks, the Department of the Treasury, and 
other Federal agencies from financially assisting State and local 
governments and school districts that have defaulted on their 
obligations, and for other purposes.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Government Bailout Prevention Act''.

SEC. 2. DEFINITION.

In this Act, the term ``State'' means--
(1) any of the several States;
(2) the District of Columbia; and
(3) any territory or possession of the United States.

SEC. 3. PROHIBITION ON THE USE OF FEDERAL FUNDS TO PAY OR GUARANTEE 
STATE AND LOCAL OBLIGATIONS.

(a) In General.--Notwithstanding any other provision of law, no 
Federal funds may be used to purchase or guarantee obligations of, 
issue lines of credit to, or provide direct or indirect grants-and-aid 
to, any State government, municipal government, local government, 
county government, or school district which, on or after January 1, 
2026, has filed for bankruptcy, has defaulted on its obligations, is at 
risk of defaulting, or is likely to default, absent such assistance 
from the United States Government.
(b) Limit on Use of Borrowed Funds.--The Secretary of the Treasury 
shall not, directly or indirectly, use general fund revenues or funds 
borrowed pursuant to title 31, United States Code, to purchase or 
guarantee any asset or obligation of any State government, municipal 
government, local government, county government, or school district or 
otherwise to assist such government entity, if, on or after January 1, 
2026, that State government, municipal government, local government, 
county government, or school district has defaulted on its obligations, 
has filed for bankruptcy, is at risk of defaulting, or is likely to 
default, absent such assistance from the United States Government.
(c) Prohibition on Federal Reserve Assistance.--Notwithstanding any 
other provision of law, no Federal Reserve bank may provide or extend 
to, or authorize with respect to, any State government, municipal 
government, local government, county government, school district, or 
other entity that has taxing authority or bonding authority, any funds, 
loan guarantees, credits, or any other financial instrument, including 
the purchasing of the bonds of such State, municipality, locality, 
county, school district, or other bonding authority, or to otherwise 
assist such government entity under any authority of any Federal 
Reserve Bank.
(d) Limitation.--Subsections (a) through (c) shall not apply to 
Federal assistance provided in response to a declared disaster.

SEC. 4. APPLICABILITY.

The prohibition under section 3--
(1) includes debt restructuring or any other related 
activity; and
(2) does not include--
(A) any discretionary appropriations or direct 
spending, as those terms are defined in section 250(c) 
of the Balanced Budget and Emergency Deficit Control 
Act of 1985 (2 U.S.C. 900(c)); and
(B) any grant awarded by the United States to the 
State government, municipal government, local 
government, county government, or school district.
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