SEC Releases FY 2005 Budget Information

FOR IMMEDIATE RELEASE
2004-11

Washington, D.C., Feb. 2, 2004 -- As part of the President's budget for fiscal year 2005, the Securities and Exchange Commission today released its Congressional request totaling $913 million for FY 2005. This request is 12.5 percent above the amount recently enacted for the SEC in fiscal 2004. The amount consists of $893 million in new budget authority and $20 million in anticipated balances from the prior year. This budget request - the first crafted by Chairman Donaldson since his arrival in February 2003 - would permit the Commission to hire 106 new employees and continue the agency's recent management and operational initiatives.

The Commission currently plans to use these staff to implement initiatives already underway, including the agency's enhanced oversight of mutual funds, and market structure reform initiatives. Should the Commission act to register hedge fund advisers, the additional staff would also be used for this purpose, or for other initiatives as market activities warrant.

The request also would allow the Commission to continue implementing a variety of operational reforms, including investing additional funds in information technology, creating the new Office of Risk Assessment and Strategic Planning, and implementing risk-based disclosure reviews and compliance inspections and examinations.

In addition to these programmatic activities, the Commission's request would provide the funds necessary for the SEC to move to the agency's previously announced new headquarters building at Station Place and is expected to keep staff salaries comparable with those of other federal financial regulatory agencies next year.

Chairman Donaldson will testify before Congress in support of the President's budget request for the Commission this spring.

Summary of SEC Budget Request for FY 2005

The President's fiscal year 2005 Budget Request includes $913 million for the SEC, a 13% increase over the Commission's appropriation for fiscal year 2004. This amount consists of $893 million in new budget authority and $20 million in anticipated balances from the prior year.

New Staff: This budget request includes $18.7 million for the Commission to hire 106 additional staff. These staff will implement recent Commission initiatives such as enhancing the agency's oversight of mutual funds, conducting a comprehensive review of market structure, and possibly the regulation of hedge funds. The following is a preliminary allocation of the staff among the Commission's programs:

Operational Reforms: The request will allow the Commission to continue implementing a variety of operational reforms initiated by Chairman Donaldson, including:

• The Office of Risk Assessment and Strategic Planning: This new office will identify risks that threaten the agency's ability to fulfill its mission.
   
• Investing in Information Technology (IT): The agency will develop a comprehensive, multi-year strategic plan that will guide the Commission's investments in document management, disclosure review, and other major IT initiatives.
   
• Continuing management initiatives: Including efforts begun in 2003 to regularly measure the agency's progress towards operational, staffing, and budget objectives.
   
• Implementing risk-based disclosure reviews and compliance inspections: The Commission will review larger and higher-risk entities more frequently, in order to identify quickly potential problems that affect the largest number of investors.

Other Components: The Commission's fiscal year 2005 budget request also includes the following:

• Annualization of FY 2004 positions: The Commission requests $9.3 million to cover the full-year costs of new staff hired in fiscal year 2004. These new staff will complete the hiring of the 842 positions we received in fiscal year 2003.
   
• Merit pay increases: The budget request includes $16.9 million for merit pay increases. The Investor and Capital Markets Fee Relief Act exempts the SEC from the pay and benefit provisions of Title V of the U.S. Code and requires the SEC to seek to maintain comparability with the salaries and benefits provided by other federal financial regulatory agencies.
   
• Cost-of-Living Adjustments: The agency's request provides $6.0 million for a 1.5 percent pay raise, effective January 2005. It also includes an additional $6.0 million to annualize the 2004 4.1 percent pay raise that became effective in January 2004.
   
• Increased space and space-related needs: The SEC requests $32.3 million for mandatory increases associated with the rental of space, as well as costs necessary to prepare space for usage by staff. These funds will cover expenses related to the agency's move into a new headquarters at Station Place in fiscal 2005 and higher rates for space rent at other SEC facilities.
   
• Additional non-personnel needs: The fiscal year 2005 budget request contains $12.2 million for an overall increase in non-personnel expenses of approximately 1.7 percent. This amount will cover inflation and other necessary increases in areas such as information technology, litigation support, and telecommunications.