Financial data bill heads to Biden

Cities, towns, counties and states will be required to standardize their financial information in machine-readable format by 2027 under a provision included in the defense authorization bill that President Joe Biden is expected to sign into law.

The Senate Thursday overwhelmingly approved the $848 billion National Defense Authorization Act of 2023, which includes the Financial Data Transparency Act. The House passed the NDAA last week. Biden is expected to sign it into law as soon as next week.

Municipal market issuers like the Government Finance Officers Association, the National League of Cities and the U.S. Conference of Mayors lobbied unsuccessfully to have the bill stripped out of the NDAA, though they did succeed in getting some of the language toned down.

Bloomberg News

The final version featured a number of changes perceived to ease the burden imposed on the muni market. Among other things, the final version shifts responsibility for the rulemaking and oversight to the Securities and Exchange Commission from the Municipal Securities Rulemaking Board, which allows for more public and market input into the rulemaking process. It also assigns to the SEC the responsibility to scale the standards to reduce any "unjustified burden," which could apply to small and rural issuers.

It also prohibits any new disclosure information categories.

Under the new law, municipal issuers will be required to disclose their data in a financial reporting standard, such as eXtensible Business Reporting Language, or XBRL, at the end of four years. The SEC and other financial regulators have two years to craft the standards.

The new law represents an unfunded mandate for governments, said Michael Gleeson, the National League of Cities' legislative director for finance, administration and intergovernmental relations, in a recent blog post to members.

The NLC will "have a seat at the table as data standards are developed by the SEC to ensure the concerns of local governments are considered," Gleeson wrote. "The SEC must be aware of the burden the rulemaking will place on local governments," he said. "We are just at the beginning of a journey for this legislation."