The Municipal Securities Rulemaking Board (MSRB) is set to implement a budget of $48.8 million for the fiscal year 2025, reflecting a modest increase of 2.9% compared to the previous fiscal year. This adjustment marks the board’s first budgeting move since the Securities and Exchange Commission (SEC) put a hold on the FY2024 rate card. Amidst ongoing discussions with stakeholders regarding the budgeting framework, this new fiscal plan offers a fresh perspective on financial transparency and operational efficiency.
In the breakdown of the proposed budget, a significant portion is earmarked for information technology, which will receive $15.1 million, a crucial investment considering the increasing role technology plays in the municipal securities market. Following IT, market transparency products and services will be allotted $12.5 million. Other allocations include funds for market regulation and structure ($6.7 million), governance and leadership ($5.7 million), finance/risk/human resources/administration ($5.6 million), and external relations ($2.9 million).
One notable trend is the slight decrease in funding for both market transparency ($12.6 million to $12.5 million) and external relations ($2.92 million to $2.91 million). This indicates a targeted approach in managing resources, possibly in response to stakeholder feedback regarding budgetary clarity and strategic priorities.
Stakeholder Engagement: A New Era of Communication
The MSRB has made noteworthy strides in fostering stakeholder engagement within the budgeting process. Two meetings were hosted, aimed at refining the rate card model and broadening the conversation around budget transparency. Esteemed organizations such as the American Securities Association and the Bond Dealers of America participated, underscoring the importance of collaboration in shaping MSRB’s financial strategies.
Transformative efforts in stakeholder communication reflected a commitment to financial responsibility. As Bo Daniels, MSRB chair, and Mark Kim, MSRB CEO, articulated in a joint letter, the board has taken significant measures to enhance clarity around budgetary allocations. The restructuring of technology functions into discrete units stands as a testament to this effort, allowing for more granular and comprehendible financial reporting.
The underlying philosophy of the MSRB’s budgeting approach embodies fiscal discipline. The overall budget allocation aligns with a five-year forecast suggesting a 5.1% compounded annual growth rate in expenses from FY2020 to FY2024. Personnel expenses dominate the budget, consuming 61% of the total, which raises pertinent questions about workforce management and operational efficiency.
The budget also allocates funds toward technology resources, professional services, and essential operational needs such as rent and third-party data services. This careful delineation of expenses can signal to stakeholders that the board acknowledges the need for rigorous fiscal management without compromising service quality.
The revenue projections for FY 2025 highlight MSRB’s reliance on diverse income streams. Market activity fees contribute the most significant portion, expected to reach $39.1 million. Other income sources include municipal advisor professional fees ($2.9 million), data subscriber fees ($2.4 million), and 529 plan underwriting fees ($1.5 million).
The methodology for estimating market activity fees incorporates a five-year historical average, balancing between transactional fees and underwriting costs. This nuanced approach emphasizes the need for stability amidst fluctuating market conditions. Stakeholders have expressed their concerns regarding the inherent volatility that annual rate card models present, advocating for a more predictable fee structure moving forward.
As MSRB steps into FY 2025, the emphasis on transparency, stakeholder engagement, and responsible expense management sets a promising precedent for future fiscal planning. By addressing stakeholder concerns and making adjustments based on collaborative feedback, the board not only demonstrates an awareness of the changing landscape of municipal securities but also lays the groundwork for financial resilience. The upcoming fiscal year serves as an opportunity for MSRB to showcase its adaptability and commitment to fostering confidence in municipal securities through prudent financial stewardship.