State, Territory, and Local Government Bailout Prevention Act

To prohibit the provision of Federal funds to State and local governments for payment of obligations, to prohibit the Board of Governors of the Federal Reserve System from financially assisting State and local governments, and for other purposes. 1. Short title This Act may be cited as the State, Territory, and Local Government Bailout Prevention Act 2. Definition In this Act, the term State (1) the Commonwealth of Puerto Rico; and (2) any other territory or possession of the United States. 3. Prohibition on the use of Federal funds to pay 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, or county government which, on or after May 1, 2016, 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, or county government, or otherwise to assist such government entity, if, on or after May 1, 2016, that State government, municipal government, or county government has defaulted on its obligations, 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, the Board of Governors of the Federal Reserve System shall not provide or extend to, or authorize with respect to, any State government, municipal government, local government, county government, or other entity that has taxing authority or bonding authority, any funds, loan guarantees, credits, or any other financial instrument or other authority, including the purchasing of the bonds of such State, municipality, locality, county, or other bonding authority, or to otherwise assist such government entity under any authority of the Board of Governors. (d) Limitation Subsections (a) through (c) shall not apply to Federal assistance provided in response to a declared disaster. 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) (B) any grant awarded by the United States to the State government, municipal government, local government, or county government.

Summary: State, Territory, and Local Government Bailout Prevention Act This bill prohibits the use of federal funds to purchase or guarantee obligations of, issue lines of credit to, or provide direct or indirect grants-in-aid to any state (defined to include Puerto Rico and any other U.S. territory or possession), municipal, local, or county government that, on or after May 1, 2016, has defaulted on its obligations, is at risk of defaulting, or is likely to default, without such federal assistance. The Departrment of the Treasury is prohibited from using general fund revenues or borrowed funds to purchase or guarantee any asset or obligation of, or to otherwise assist, any such state, municipal, local, or county government. The Board of Governors of the Federal Reserve System is prohibited from: (1) providing or extending to, or authorizing with respect to, such a state, municipal, local, or county government or other entity with taxing authority or bonding authority, any funds, loan guarantees, credits, or any other financial instrument or other authority, including bond purchases; or (2) otherwise assisting such a government entity under any Board authority. Such prohibitions: (1) shall not apply to federal assistance provided in response to a declared disaster, (2) include debt restructuring or any other related activity, and (3) exclude any discretionary appropriations or direct spending and any grant awarded by the United States to the state, municipal, local, or county government.