The CFTC’s operating budget for fiscal year 2011 was $169 million. On February 14th, President Obama requested that this budget be increased to $308 million, primarily due to increased personnel and technology costs relating to the implementation of the Act and the CFTC’s expanded supervisory and enforcement role.[1] In a statement released that same day, Commissioner Bart Chilton emphasized the importance of these additional funds, noting that “[w]ithout adequate funding of our financial market regulatory apparatus, the new legislation won’t mean much in the real world.” The final CFTC budget will depend on numerous factors, including whether the Commission is allowed to assess swap user fees.
Weeks before the President’s budget was proposed, Commissioner Chilton stated that opponents of reform have attempted to “deny resources to regulators—starving us on the vine if you will—and thereby denying us the ability to enforce the new law and oversee these markets.”[2] In the event that sufficient funding is not provided to support the CFTC’s expanded role, Commissioner Chilton suggested that the CFTC be permitted to impose swap transaction fees, possibly on a per-transaction basis. The President’s proposed budget ultimately included $117 million in user fees for the upcoming fiscal year (and some $588 million through 2016) to help pay for the CFTC’s non-enforcement activities. Opponents of this fee, including Commissioner Scott O’Malia, have labeled it a “transaction tax” on the financial industry which, they argue, can ill-afford an additional tax burden in a time of tepid economic recovery during which it must absorb numerous additional costs relating to the implementation of financial reform. The assessment of swap user fees remains open for debate and ultimately will require Congressional approval.
[1] Note that the President also proposed a budget of $1.4 billion for the SEC, which represents a $300 million increase over its fiscal year 2011 budget.
[2] Keynote Address of Commissioner Bart Chilton to the Institutional Investor TraderForum, New York, NY (Jan. 26, 2010).