The 2015 operating budget increase included a net increase of 4.2 full-time equivalent employees and an additional $7.3 million for employee compensation.

The board also approved a historically high overhead transfer rate of 71.8%, citing an increase in the percentage of insured shares held by state credit unions.

The total budget went up from $268.3 million in 2014 to $279.4 million in 2015.

"Additional staff proposed includes nine new positions as outlined below. This increase is offset by the reduction of five general examiner positions to be eliminated from the regional offices for a net increase of 4.2 FTEs," the board action memorandum said.

The only way to cut the NCUA operating budget would be to cut staff, Matz said, which was out of the question.

"[The] NCUA cut 71 FTEs between 2001 and 2008, to keep costs down," Matz said. The agency's smaller exam force and longer exam cycle prevented it from identifying problems at insured credit unions before they had to post losses, she added.

Staff compensation and benefits expenses increased 3.7% in the 2015 budget by $7.3 million for a total cost of $201.9 million. Pay and benefits represented 72% of the total budget. Travel increased 2.7% compared to the prior year.

According to the board action memorandum, the agency identified significant budgetary changes including the reallocation of 18 existing regional staff from generalist positions to the NCUA's "priority areas" of capital markets, lending, and information systems.

"Employing specialists rather than generalists adds expertise commensurate with the increasing sophistication of credit union operations, so that NCUA will be better equipped to address these risk areas going forward," the board action memorandum said.

Matz expanded on the topic, addressing criticism that the NCUA should cut staff as the number of credit unions decline.

"Those assets don't disappear, and the remaining credit unions grow larger and more complex," she said. "And, they require more examiners with specific specialties."

The budget proposed adding a total of 10 support staff positions in the Office of National Examinations and Supervision, the Office of Chief Economist, Office of Continuity and Security Management and the Office of Consumer Protection.

The budget also accounts for a cybersecurity manager in the Office of Examination and Insurance so the agency can be "better prepared for and promote the awareness of critical risks and related threats."

McWatters spoke in favor of reinstating the NCUA's budget hearings, which were discontinued in 2010.

"I strongly encourage the board to deliver the proposed budget and calculation of the proposed OTR to the credit union community and general public at least two weeks prior to a formal budget hearing," McWatters said at the meeting.

"The agency should afford the public the opportunity to submit written comments regarding the proposed budget and OTR and to make presentations to the board in an open meeting," he added. "The board should not formally act on the proposed budget or OTR until it has reflected upon and given due consideration to the comments."

McWatters interrupted Matz as she attempted to call a vote on the operating budget, again urging the agency to return to the budget hearing process and voicing his disapproval.

Matz countered, saying those who had actually participated in the budget process were satisfied with it. The chairman also said too much budget transparency could result in regulatory capture, which McWatters strongly denied.