(Bloomberg News) U.S. financial regulators, struggling for months with budgets unequipped to handle new responsibilities imposed by the Dodd-Frank Act, will be forced to go another 10 weeks without a funding increase.

Federal lawmakers agreed yesterday to fund the government at current levels through March 4, denying budget increases sought by the Securities and Exchange Commission and Commodity Futures Trading Commission after the regulatory overhaul was enacted. Agreement on the stopgap funding measure came hours before the expiration of an earlier temporary spending bill.

"Anytime you have a short-term measure to fund the yearlong capacity of the government, it creates complications," White House press secretary Robert Gibbs said in his daily briefing yesterday. The temporary accord is "something far less than ideal in providing the needed certainty," he said.

Government funding for the fiscal year ending Sept. 30 has been caught up in partisan battles over taxes, spending and the meaning of Republican gains in the November elections. Republicans taking control of the House next month have promised to reduce funding though spending cuts and more aggressive oversight of regulators, making the short-term measure potentially problematic for the two agencies.

The SEC and CFTC, tasked with writing most of the rules dictated by Dodd-Frank, sought budget increases to at least $1.25 billion and $261 million, respectively, for staffing, technology and infrastructure. The increases would be 10% for the SEC and more than 50% higher than the CFTC's current $169 million budget.

Without that funding, new initiatives will be postponed or scrapped, regulators have said.

Indefinite Delays

SEC Chairman Mary Schapiro, who has told lawmakers the SEC must upgrade technology and add 800 employees to comply with Dodd-Frank, is relying on Dodd-Frank's pledge to double the agency's budget to $2.25 billion by 2015.

Amid the current uncertainty, the SEC has indefinitely delayed setting up new offices and backed out of a lease for almost 1 million square feet of office space in Washington. The agency also put off planning for a new primary data center and reduced travel by its investigators.

"Operating under the continuing resolution is already forcing the agency to delay or cut back enforcement and market oversight efforts," John Nester, an SEC spokesman, said in a statement yesterday. "The longer we operate under significant budgetary restrictions, the greater the impact."

Gensler Lobbying

CFTC Chairman Gary Gensler has been lobbying lawmakers for the additional money, which agency officials had hoped to receive as early as last week.

"Current funding is far less than what is required to properly fulfill our significantly expanded role," Gensler said Dec. 15 in testimony at a House Agriculture Committee hearing.

The CFTC needs the funding to "enhance its surveillance program, prevent market disruptions" and implement Dodd-Frank, he told lawmakers.

Senator Tim Johnson, the South Dakota Democrat in line to become chairman of the Senate Banking Committee next month, said he was "concerned" that the short-term measure would hamper the regulators' ability to implement the law.

"Under this funding bill, these agencies could face a lack of resources that ultimately leaves investors more vulnerable," Johnson said in a statement yesterday.

Senate Democrats introduced two measures this month that would have provided the agencies with requested boosts in funding--a longer-term continuing resolution in the House and a Senate bill that would have cobbled together each of the un-passed appropriations bills from the current session.

Republican senators, in both cases, stepped in to oppose the measures, citing a desire to cut spending early in 2011 and to block about $8 billion in earmarks in the Senate measure.

Seeking Compromise

Senate Majority Leader Harry Reid, a Nevada Democrat, announced last week that he would give up trying for a lengthier, $1.2 trillion funding package and instead seek compromise on the short-term measure.

"The voters don't want us to wait to cut spending and debt and fight the health care bill next October--they want us to do these things immediately," Senate Minority Leader Mitch McConnell, a Kentucky Republican, said in a Dec. 17 floor speech.

Gibbs, in his briefing, said President Barack Obama would work with Congress in the coming months "to ensure necessary funding for critical government operations."

Congress approved the Dodd-Frank regulatory overhaul in July to respond to the worst U.S. economic collapse since the Great Depression. The law requires the SEC and CFTC to write rules to regulate derivatives and oversee the market to prevent wrongdoing. Trading in derivatives, financial contracts tied to bonds, stocks, currencies or events such as changes in interest rates or weather, contributed to the 2008 collapses of Lehman Brothers Holdings Inc. and America International Group Inc.

The SEC also has been tasked with monitoring thousands of hedge funds, as well as creating new units to oversee credit- rating firms and handle whistleblower tips.