Introduction
Every fall across the federal government, a familiar ritual unfolds. As the fiscal year draws to a close, agencies rush to spend down their remaining funding, often on low-priority purchases, so that they don’t end up with a smaller budget down the road. This phenomenon, known as “use it or lose it” spending, is a predictable consequence of flawed budget incentives that trump thoughtful financial management.
On Wednesday, the House Committee on Oversight and Government Reform will mark up Representative Rich McCormick's (R-GA) Incentivize Savings Act (H.R. 5438), a proposal to reverse these incentives and reward agencies for prudent stewardship of taxpayer dollars. This reform represents a constructive step toward aligning agency behavior with Congress’s fiscal priorities.
Background: The Problem with Fourth-Quarter Spending Incentives
Over the years, National Taxpayers Union Foundation and other watchdogs have tracked a consistent spike in federal outlays during the final weeks of the fiscal year, which ends on September 30. Agencies often choose to spend remaining funds before the deadline rather than return money to the Treasury even if this means that those expenditures go to questionable purchases.
For example, past reviews have documented year-end spending on items such as last-minute equipment upgrades, unnecessary training contracts, and nonessential office purchases that appear driven more by expiring budget authority than operational need. These questionable purchases happen because of fear that, if members of Congress see that if an agency doesn’t use up its entire budget allotment, then future budget requests may face reductions.
What the Incentivize Savings Act Would Do
Rep. McCormick’s Incentivize Savings Act aims to flip the script on end-of-year spending by allowing agencies to share in the benefits of prudent spending rather than being punished for it.
Under the bill:
49% of unobligated funds would be retained by the agency for future use;
49% would be applied directly to deficit reduction; and
2% could be used for performance bonuses, capped at 10% of an employee’s salary.
By splitting savings between agencies and taxpayers, the bill encourages restraint while ensuring that the public shares directly in the fiscal benefits. The modest bonus provision is intended to reinforce a culture of responsible budgeting, not to create windfalls.
The bill is best understood as targeting unobligated balances, not funds that have already been legally committed through contracts or grants. Ensuring this distinction is clear would strengthen the legislation without undermining its core objective of discouraging wasteful end-of-year spending. Properly structured, the reform should complement congressional oversight rather than displace it.
Conclusion
Rep. McCormick's Incentivize Savings Act offers a constructive approach to improving federal budget discipline by addressing the incentives that drive wasteful year-end spending. By rewarding restraint rather than rushing dollars out the door on questionable purchases, the bill encourages agencies to act as better fiscal stewards to curb unnecessary spending that contributes to the nation’s massive federal debt.