Yesterday, the House Appropriations Committee approved the fiscal year 2016 Financial Services and General Government Appropriations bill. As discussed below, the bill is eerily similar to the bill Congress passed four years ago -- both bills appropriate $222 million less than the SEC requested, freeze the SEC's budget at the prior year's level, and prohibit the SEC from drawing upon an important reserve fund.

In 2010, it appeared that the SEC's long-held goal of being self-funded was on the brink of occurring. Indeed, on June 16, 2010, House and Senate lawmakers were reported to be in agreement that the agency should be able to fund itself based on the fees it collected. Less than two weeks later, however, a last minute compromise between Senate and House negotiators finalizing the financial reform bill rejected self-funding. 

As part of the compromise under which the SEC continued to be subject to the Congressional appropriation process, the SEC was promised some new flexibility in its budget process. Specifically, Congress established a $100 million reserve fund that the SEC was authorized to tap into in its discretion to pay for items such as technology or capital improvements. 

Five years later, however, it is clear that what Congress giveth, Congress can just as easily taketh away. It has now become the norm for Congress to not only freeze the SEC's budget at below-requested levels, but also to add language to its appropriation bill prohibiting the SEC from spending any money out of the Dodd-Frank reserve fund. 

Today is not Groundhog Day, but I've pasted below a post I wrote almost four years ago to the day about the funding bill passed for FY 2012 by the Appropriations Committee. I've edited it to reflect the bill passed yesterday for FY 2016, which did not take much effort on my part. Perhaps most amazingly, the House bill passed yesterday appropriated $222 million less than the SEC requested for FY 2016 -- exactly the same differential as in FY 2012!

House Bill Would Keep SEC Budget Flat in 2012, 2016, Freeze $100 Million Reserve Fund

Bruce Carton | June 16, 2011 June 18, 2015

On Wednesday, the House Appropriations Committee released a bill that would freeze the SEC's FY 2012 2016 budget at its current level of $1.185 $1.5 billion, thereby rejecting the SEC's FY 2012 2016 budget request of $1.407 $1.722 billion. In May 2011 2015, SEC Chairman Mary Schapiro Jo White testified that through Dodd-Frank, Congress had handed the SEC a host of new responsibilities on top of what was previously on its plate, including the tasks of promulgating more than 100 new rules, creating five new offices (including an entire whistleblower program), producing more than 20 studies and reports, and much more. Schapiro stated that the increased budget the agency sought was necessary to handle its current and new responsibilities.

Not only would the House bill appropriate $222 million less than the SEC has requested, it would also place a freeze on the SEC's ability to draw on the $100 million Reserve Fund established under Dodd-Frank. Section 991 of Dodd-Frank creates this fund and states that the SEC may draw upon it up to "$100,000,000 in any 1 fiscal year, as the Commission determines is necessary to carry out the functions of the Commission" (e.g., for expenses such as such as technology or capital improvements).

Section 623 624 of the House bill would prohibit the SEC from doing accessing this fund, as it expressly states that "[d]uring fiscal year 2012, 2016 no funds shall be obligated from the Securities and Exchange Commission Reserve Fund established by section 991 of the Dodd- Frank Wall Street Reform and Consumer Protection Act."