This bill seeks to prevent federal financial bailouts for state and local governments and school districts experiencing fiscal distress. It broadly prohibits the use of federal funds to assist entities that have defaulted, filed for bankruptcy, or are at risk of defaulting on their obligations on or after January 1, 2026. This includes preventing the federal government from purchasing or guaranteeing their obligations, issuing lines of credit, or providing direct or indirect grants-in-aid specifically aimed at addressing their financial instability. The legislation further restricts the Department of the Treasury from using general or borrowed funds for such assistance and prohibits Federal Reserve banks from extending any financial instruments, including loans or bond purchases, to these distressed entities. While encompassing debt restructuring, the prohibition does not apply to federal assistance provided in response to a declared disaster . Importantly, the bill clarifies that its restrictions do not extend to discretionary appropriations , direct spending , or any general grants awarded by the United States , focusing instead on specific bailout mechanisms.