The Municipal Securities Rulemaking Board (MSRB) has finalized and approved a budget of $48.8 million for the fiscal year 2025, marking a strategic yet modest increase of 2.9% from the preceding year. This budgeting process comes on the heels of a significant pause in its pricing model after the Securities and Exchange Commission’s suspension of the FY 2024 rate card. Notably, the MSRB engaged in a series of stakeholder meetings to gather insights and refine their approach to budgeting, showcasing a commitment to transparency and collaboration.
The allocations for the FY 2025 budget reveal a concentrated dedication to enhancing various operational facets. A substantial portion, $15.1 million or approximately 31% of the budget, is earmarked for information technology services, reflecting the MSRB’s acknowledgment of the critical role technology plays in modern governance and operational management. Furthermore, investments in market transparency products and services account for $12.5 million, highlighting an enduring commitment to transparency across municipal markets.
Other significant allocations include $6.7 million for market regulation and market structure, which underscores the board’s ongoing efforts to maintain robust regulatory frameworks. The governance and leadership segment will receive $5.7 million, while finance, risk management, human resources, and administration combined will also see a budget of $5.6 million. External relations are allocated $2.9 million. Notably, the budget reveals the organization’s intent to maintain fiscal discipline and transparency, strategically responding to stakeholder feedback.
The MSRB’s proactive approach in conducting two distinct stakeholder meetings exemplifies a watershed moment in its budgeting transparency. The first meeting aimed specifically at discussing the rate card model, which has historically guided fee structures but also faced criticism for creating variability and unpredictability in fees. The second meeting was more inclusive, allowing stakeholders from various organizations, including the American Securities Association and the Investment Company Institute, to voice broader concerns about budgeting processes and transparency.
Bo Daniels, MSRB chair, alongside chief executive Mark Kim, reflected on the importance of stakeholder engagement, stating that they have “taken to heart” the quest for clarity regarding budget allocations. The restructuring of technology functions into discrete units is particularly notable, as it aims to deliver more precise budgetary information, thus addressing previously expressed concerns by stakeholders around transparency in budget spending.
The FY 2025 budget derives its financial backbone from eight different categories of revenue streams, with market activity fees leading the pack at $39.1 million. This reliance on market activity fees is significant, comprising over 80% of total expected revenue, which reflects the transaction-based nature of municipal securities. Other notable contributions come from municipal advisor professional fees ($2.9 million), data subscriber fees ($2.4 million), and 529 plan underwriting fees ($1.5 million), among others.
Interestingly, the MSRB employs historical averages to project revenues from these fees, demonstrating a conservative and strategic approach towards fiscal projections. This practice is vital, particularly in a financial landscape that can be unpredictable. The decision to utilize a five-year average for market activity fees mitigates risks associated with sudden fluctuations in market behavior.
With personnel costs representing 61% of the budget, the MSRB underscores the significance of investing in human capital, which is pivotal for maintaining service quality and regulatory efficacy. Additionally, the board maintains that its budget philosophy centers around fiscal discipline, as reflected in a projected 5.1% compounded annual growth rate in expenses from FY 2020 to FY 2024. This awareness of growth rates in contextual financial terms speaks to the organization’s intent to balance necessity with sustainability.
However, not all budgetary elements are increasing; the funds allocated for market transparency products and services, as well as external relations, have seen slight reductions. This presents an opportunity for introspection, as stakeholders voice their concerns about fee volatility stemming from annual adjustments to the rate card model. By striving for stability in fee structures while prioritizing their key investments, the MSRB can strike a beneficial balance.
The MSRB’s FY 2025 budget reflects a thoughtful prioritization of technology, regulatory structure, and stakeholder concerns. As the organization continues to evolve, the ongoing dialogue with stakeholders remains essential to ensure transparency and effective governance within the municipal securities landscape. This careful balancing act between growth, stakeholder engagement, and fiscal prudence will ultimately shape the future landscape of municipal finance.