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Government Bailout Prevention Act
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.
Summary
This bill would prohibit the federal government from using federal funds to assist state, local, or municipal governments or school districts that have filed for bankruptcy, defaulted on obligations, or are at risk of defaulting on or after January 1, 2026. The bill prohibits the Treasury Department from purchasing or guaranteeing such entities' obligations and prevents the Federal Reserve from providing loans, credit lines, or purchasing bonds of such entities. The prohibitions would not apply to assistance provided in response to declared disasters or to certain discretionary appropriations and grants. The bill includes debt restructuring and related activities in its prohibitions.
AI-generated plain-language summary of the bill text — neutral, and may be imperfect. See the full text below for the exact wording.
Sponsor (1)
- Sen. Young, Todd [R-IN] (R-IN)
6 cosponsors
- Sen. Cornyn, John [R-TX] (R-TX)
- Sen. Cotton, Tom [R-AR] (R-AR)
- Sen. Crapo, Mike [R-ID] (R-ID)
- Sen. Graham, Lindsey [R-SC] (R-SC)
- Sen. Marshall, Roger [R-KS] (R-KS)
- Sen. Sheehy, Tim [R-MT] (R-MT)
Actions (2)
- May 21, 2026 Read twice and referred to the Committee on Banking, Housing, and Urban Affairs. · senate
- May 21, 2026 Introduced in Senate
Similar bills (6)
Bills with similar text or summary — includes reintroductions across Congresses. Ranked by semantic similarity of the bill text (computed locally); a neutral discovery aid, not a claim the bills are duplicates.
Full text
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. <all>
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