Incentivize Savings Act
- Sponsor
- Rep. McCormick, Richard [R-GA-7]
- Committees
- Oversight and Government Reform Committee (primary)
- Last action
- Feb 4, 2026
Bottom line
The bill aims to incentivize federal agencies to save money by reallocating unspent funds, partially rewarding employees, and limiting future budget growth for agencies that underspend.
What it actually does
This bill, the "Incentivize Savings Act," establishes new rules for Federal agencies' unexpended appropriations. It mandates that 49% of unspent funds remain available for the agency for an additional fiscal year, 49% be used for public debt payments, and 2% be allocated for retention bonuses for agency employees, capped at 10% of basic pay. Additionally, agencies that have unexpended funds are restricted from requesting a budget increase greater than the Consumer Price Index (CPI) change for the subsequent fiscal year.
Proponents argue
Supporters argue that the bill creates a direct incentive for federal agencies to be more fiscally responsible and efficient with taxpayer dollars. By allowing agencies to retain a portion of savings and reward employees, it encourages prudent spending while simultaneously reducing the national debt. The budget cap prevents agencies from artificially inflating budgets to avoid the reallocation rules.
Opponents contend
Critics might contend that this bill could create perverse incentives, leading agencies to underspend on critical programs or services to secure bonuses or retain funds, potentially compromising their mission. The budget cap could also hinder an agency's ability to respond to unforeseen needs or inflation-adjusted operational costs, especially if the CPI adjustment is insufficient for actual operational cost increases.
The bill is very concise, allowing for a quick and thorough understanding of its provisions.
Section 2(a), inserting new 31 U.S.C. 1311(a)
Reallocation of Unexpended Agency Funds
When a federal agency has funds appropriated for a specific period that it doesn't spend, this provision dictates how those unspent funds are to be divided. Specifically, 49% will stay with the agency for an extra year, 49% will go towards paying down the national debt, and the remaining 2% will be used for retention bonuses for employees within that agency.
Supporters argue
Proponents argue this provision incentivizes agencies to be more efficient by allowing them to retain some savings for future use and reward staff, while also directly addressing the national debt.
Critics contend
Opponents might argue that this could lead to agencies deliberately underspending on critical programs to secure bonuses or retain funds, potentially compromising service delivery or program effectiveness.
Tradeoffs
Balances agency flexibility and employee incentives against the broader goal of debt reduction and preventing wasteful spending.
Section 2(a), inserting new 31 U.S.C. 1311(b)
Retention Bonus Limitations and Residual Funds
This section sets specific rules for the retention bonuses mentioned in the previous provision. It states that no individual retention bonus can be more than 10% of an employee's basic pay. If, after paying all eligible bonuses, there's still money left over from the 2% allocated for bonuses, that remaining amount must also be used to pay down the public debt.
Section 2(a), inserting new 31 U.S.C. 1311(c)
Budget Request Limitation for Agencies with Unexpended Funds
If a federal agency has unspent funds that trigger the reallocation rules, its budget request for the following fiscal year cannot be larger than its budget request from the year the funds expired, adjusted only for inflation based on the Consumer Price Index (CPI). This means agencies cannot ask for significantly more money if they've demonstrated an inability to spend their previous allocations.
Section 2(a), inserting new 31 U.S.C. 1311(d)
Definition of Federal Agency
This section defines which entities are considered a "Federal agency" for the purposes of this Act. It includes Executive agencies (as defined in 5 U.S.C. 105) and other executive branch agencies, specifically mentioning the United States Postal Service and the Postal Regulatory Commission. Notably, it explicitly excludes the American National Red Cross.
The bill explicitly excludes the American National Red Cross from the definition of "Federal agency" for the purposes of these new spending rules.
Section 2(a), new 31 U.S.C. 1311(d)
Why it matters:This is standard legislative practice to define terms and scope. The Red Cross is a federally chartered, but not governmental, organization, so its exclusion is logical.
Case for: Ensures the bill's provisions apply only to actual government agencies and avoids imposing federal budget rules on a humanitarian organization that operates with significant private funding.
Case against: No strong case against, as its exclusion is consistent with its unique status.
Estimated impact: Prevents the Red Cross from being subject to federal unexpended funds reallocation and budget caps.
The retention bonuses are subject to the existing framework of section 5754 of title 5, United States Code, with the added limitation that they cannot exceed 10% of an employee's basic pay.
Section 2(a), new 31 U.S.C. 1311(b)(1)
Why it matters:This is standard legislative drafting to integrate new provisions into existing legal frameworks rather than rewriting them.
Case for: Ensures consistency with established federal retention bonus policies, leveraging existing administrative structures and criteria while adding a specific cap relevant to this bill's purpose.
Case against: No specific opposition to the cross-reference itself, though arguments could be made about the adequacy of the 10% cap.
Estimated impact: Integrates the new bonus system into existing federal HR practices, ensuring bonuses are administered under established rules for eligibility and approval, but with a new financial source and cap.
The budget request limitation for agencies with unexpended funds is adjusted by the percentage change in the Consumer Price Index (all items—United States city average).
Section 2(a), new 31 U.S.C. 1311(c)
Why it matters:This is a precise legislative instruction for how to calculate the inflation adjustment, ensuring a consistent and objective measure.
Case for: Provides a clear, objective, and widely accepted measure for inflation adjustment, preventing arbitrary budget increases while acknowledging the need to account for rising costs.
Case against: Critics might argue that a general CPI adjustment may not adequately reflect the specific cost increases faced by certain agencies or programs, particularly those with specialized equipment, personnel, or unique operational challenges.
Estimated impact: Directly links agency budget growth to a specific inflation metric, potentially limiting real growth for agencies that consistently underspend.