# December 1st, 2025 Budget Comm Minutes

## **Budget Committee Weekly Meeting — December 1st, 2025**

**Date:** December 1, 2025\
**Time:** 07:47 EST (weekly Budget Committee call)

**Attendance:**

* **Committee Members (voting):**
  * Kris Kowalski – Chair
  * Megan Hess – Vice Chair
  * Kriss Baird
  * Murasaki
  * Nico Cerny
  * Rita Mistry
* **Committee Support / Staff:**
  * Lloyd Duhon – Budget Secretary
  * Simo Simovic – Project Manager, Budget Process
* **Executive Leadership / Guests:**
  * Jack Briggs – Interim Executive Director, Intersect

**Quorum:** Confirmed (Megan, Murasaki, Kris K, Nico, Kriss B, and Rita present as voting members).

***

### **1. Opening and Context**

* Jack opened with a recap and context after an **intense 2–3 week period**, including:
  * The **mainnet incident** (\~10 days prior).
  * Rapid drafting and publication of the **Critical Integrations Budget Info Action**.
* The critical integrations proposal was a **joint effort** involving:
  * Founding entities
  * Intersect
  * Midnight
  * Governance input from Nico on constitutional alignment.

***

### **2. Critical Integrations Budget Info Action – Status Update**

#### 2.1 Process and Outcome

* Following the mainnet incident, **Jack and Murasaki** coordinated quickly to frame a **Critical Integrations Budget Info Action** addressing ecosystem needs (e.g., tier-one infrastructure, integrations).
* A call with **Charles** and intense drafting work led to:
  * The **budget info action published on Thursday** (prior week).
  * The proposal becoming the **most popular budget info action to date** in terms of DRep engagement and support.
* Result:
  * The info action is **passing the approval threshold**.
  * There are **a few “no” votes** with substantive rationale; Jack and Murasaki are reviewing these carefully to address them in the upcoming **Treasury Withdrawal governance action**.

#### 2.2 Next Steps – Withdrawal Action

* A **Treasury Withdrawal (TW)** governance action will follow, in parallel with:
  * Responding to concerns raised in “no” votes.
  * Aligning timing and constitutional requirements.

***

### **3. Net Change Limit Extension Governance Action (Hosky & CC)**

#### 3.1 Overview

* Over the weekend, a **governance action proposed by Hosky and some CC members** was published to:
  * **Extend the current Net Change Limit (NCL) by 8 epochs.**
* Jack and the committee view this **positively** because it:
  * Provides **extra time** to handle NCL and Critical Integrations properly.
  * Reduces the risk of **New Year holiday voting bottlenecks**.
  * Avoids constitutional edge-cases around overlapping timelines.

#### 3.2 Constitutional Timing Issue (Explanation by Nico)

Nico explained why the extension is constitutionally important:

* Current situation without extension:
  * The **Critical Integrations Budget Info Action** expires at the **end of epoch 603** (Dec 30).
  * Only after epoch 603 transitions to **604** can the system determine whether the info action is formally **approved and ratified**.
  * The **current NCL expires at the end of epoch 604** (Jan 4, 2026).
* If the **Treasury Withdrawal** for Critical Integrations only reaches required thresholds in **epoch 604**, its **enactment would occur at the transition to epoch 605**.
* Problem:
  * At the moment of enactment (start of epoch 605), **no valid NCL** would exist, rendering the TW **unconstitutional**.
* The **8-epoch extension** solves this by ensuring:
  * There is **overlap** between:
    * the ratified Critical Integrations budget & TW timelines, and
    * a **valid NCL**.

#### 3.3 Position of Budget Committee

* Jack intends to secure **Board permission for Intersect to publicly endorse** the NCL extension and support its passage.
* The extension:
  * Gives the **Budget Committee more time** to refine the **2026–27 NCL**.
  * Removes pressure to push NCL votes through during the holiday season.
* Next Board meeting: **December 11, 2025**
  * NCL and related topics will be on that agenda.

***

### **4. 2026–27 Net Change Limit – Reconsideration**

#### 4.1 Status of Existing Proposal

* A **350M ADA, 18-month NCL** proposal (2026–27) was **already submitted to the Board** following prior committee work.
* Original rationale:
  * **2025 inflows** (January–December), plus
  * **Unspent surplus** from the 2025 NCL, rounded to a clean **350M ADA**.
* New reality:
  * The **Critical Integrations budget (\~70M ADA)** will largely consume the **previous NCL surplus**.
  * Therefore, the simplification “inflows + leftover = 350M” is **no longer accurate** as written.

#### 4.2 Board Feedback

* Jack reported early Board feedback:
  * Board wants a **clearer justification** for the 350M ADA number.
  * There is a sense that **additional capacity** may be warranted (i.e., potentially **more than 350M**), to:
    * Enable more **strategic investments**, and
    * Avoid constraining major ecosystem opportunities.
* No specific alternative number (e.g. 400M or 500M) has been requested yet, but Board is open to a **higher NCL** if properly justified.

#### 4.3 Discussion: Draper & Other Large Budget Items

* **Draper multi-year budget (\~70M ADA):**
  * Not all drawn in year one; expected in staged withdrawals over several years.
  * Raises questions:
    * How much of **multi-year commitments** should be reflected in any **single-year NCL**?
    * Does it overly complicate the process to track multiple years of residual commitments?
* **Accounting complexity & ADA price volatility:**
  * If 70M ADA is withdrawn upfront into a contract:
    * It becomes a **large honeypot** exposed to price swings and governance/longevity questions.
  * If instead:
    * DReps approve **annual withdrawals** (e.g., 20M ADA in 2026, more later),
    * There is room to **adjust** draws based on ADA price and updated needs.
* Committee acknowledges:
  * Multi-year plans will add **complexity**, especially with changing ADA prices.
  * However, **per-year TWs** preserve flexibility and allow DReps to make **contextual decisions** each year.

***

### **5. Role of a Treasury Management Working Group**

#### 5.1 Concept

* Lloyd reiterated a previous idea:
  * Establish a **Treasury Management Working Group** composed of:
    * Representatives from **founding entities**,
    * IO, CF, Midnight, major service providers,
    * Possibly CF business development (e.g., Pierre) and others close to the pipeline.
* Purpose:
  * Gather forward-looking information on **large-scale funding needs** (e.g., Draper, stablecoin liquidity, infrastructure asks).
  * Size expected **Treasury “load”** over the next 1–3 years.
  * Provide inputs to help **calibrate NCL levels** beyond strictly inflow-based logic.

#### 5.2 Tradeoffs

* **Pros:**
  * Better visibility on **critical strategic asks**.
  * More nuanced calibration of NCL (e.g., inflows + specific top-up).
* **Cons:**
  * Administrative overhead and coordination burden.
  * Risk that the committee still **won’t have complete information**.
  * Could delay time-sensitive decisions, especially given current **time constraints**.

***

### **6. NCL Strategy – Options and Philosophical Debate**

#### 6.1 Two Main Approaches

1. **Conservative, inflow-based approach**
   * NCL = **previous-year inflows** (optionally ±X%).
   * No deliberate deficit; the **Treasury is preserved** or slowly grows.
   * Special large opportunities require **dedicated NCL raises** (e.g., a one-off NCL increase tied to a specific proposal).
2. **Investment-oriented, deficit-tolerant approach**
   * NCL deliberately set **above inflows** (e.g., inflows + 20%, 30%, etc.).
   * Acknowledges that:
     * The Treasury is a **finite but investable resource**.
     * Some deficit spending is justified to **grow the ecosystem and future inflows** (sovereign wealth fund analogy).

#### 6.2 Nico’s Perspective

* Intersect’s core mandate may be:
  * Ensure Cardano governance **always has a valid NCL**.
  * Base NCL on **sound, simple logic**:
    * e.g., **2025 inflows ±15%** as the **Intersect baseline NCL**.
* If coalitions (e.g., pentad) want to **spend more**:
  * They can create a separate **NCL governance action** for a higher limit tied to a specific proposal.
* Caution:
  * Spinning up a fully-fledged treasury-management function within the committee may be **too heavy** and still incomplete.

#### 6.3 Lloyd’s Percentage-Of-Income Framework

* Proposed medium/long-term pattern:

  > NCL is defined as:\
  > **Available income for period = previous-year inflows**\
  > **NCL% = desired spend percentage (e.g., 90%, 100%, 120%)**
  >
  > Net Change Limit for the year = **Income × NCL%**
* Scenarios:
  * **100%** → purely spend current inflows (Treasury balance stable).
  * **<100%** → Treasury grows (saving for future).
  * **>100%** → Treasury shrinks deliberately to fund aggressive growth.
* Over time, community can choose a comfortable **NCL% range**, balancing prudence and investment.

#### 6.4 Simo’s Question to Voting Members

* Simo asked each voting member to reflect on:
  * Whether they support:
    * **Inflows-only NCL**,
    * **Inflows + modest premium**, or
    * **More aggressive spending above inflows**.
* This feedback is needed to craft a **credible rationale** and **wording** for the final NCL governance action.

***

### **7. Emerging Consensus for This Cycle**

#### 7.1 Keep 350M ADA, Adjust Rationale

* Given time constraints and the new context, the discussion converged around:
  * **Keep the 350M ADA NCL figure** (rather than scaling it down).
  * Update the rationale to reflect:
    * **Actual 2025 usage** (2025 effectively used up to 350M ADA once Critical Integrations is included).
    * That 350M is roughly **2025 inflows plus \~20%**, representing a **modest, deliberate premium** to enable strategic investment.
  * Maintain the **18-month window** structure, with further refinements to exact epochs and wording.
* Arguments in favor:
  * Reducing NCL below 350M now would likely **force another NCL raise mid-year**, increasing governance overhead.
  * 350M is still **relatively conservative** vs. the total Treasury balance.
  * It leaves room for:
    * **Critical Integrations**,
    * Test deployments of higher-impact initiatives, and
    * Additional proposals, without precluding later special NCL actions.

#### 7.2 Timing & Process

* Because the **Critical Integrations budget** undermined the old “inflows + leftover” narrative, the **rationale text must be updated**.
* There is not yet a final vote on the updated rationale; the intention is:
  * **Revise the document this week**, and
  * **Vote at the Wednesday meeting** (if quorum is present).
  * Monday’s weekly call will act as a **fallback** if Wednesday does not achieve quorum.

***

### **8. Action Items**

| Action                                                                                                         | Owner                              | Due Date                    | Notes                                                                                           |
| -------------------------------------------------------------------------------------------------------------- | ---------------------------------- | --------------------------- | ----------------------------------------------------------------------------------------------- |
| Update NCL rationale to reflect 2025 inflows + \~20% and full expected usage (including Critical Integrations) | Lloyd & Simo                       | By Wednesday, Dec 3, 2025   | Keep NCL at 350M ADA; clarify logic and narrative.                                              |
| Prepare updated NCL draft for committee review and vote                                                        | Lloyd & Simo                       | Next Wednesday meeting      | Vote if quorum is present; Monday is backup.                                                    |
| Ensure newly elected committee members are added to invites and permissions                                    | Lloyd & Simo                       | Immediately after meeting   | Needed for quorum and inclusion in upcoming NCL decisions.                                      |
| Coordinate with Board on support for the NCL extension GA                                                      | Jack                               | Before Dec 11 Board meeting | Seek Board permission to publicly endorse the extension.                                        |
| (Optional longer-term) Initiate Treasury Management Working Group                                              | Lloyd (with input from Nico, Simo) | To be scheduled             | Identify founding entity reps, IO, CF BD (e.g., Pierre), etc., to improve medium-term planning. |

***

### **9. Decisions Recorded**

* **No formal vote** was taken on the updated NCL rationale during this meeting.
* **Emerging direction**:
  * Maintain **350M ADA** as the proposed NCL amount.
  * Treat it as **2025 inflows + \~20%** premium.
  * Update rationale text accordingly and **seek formal approval at the next meeting**.

***

### **10. Adjournment**

* Meeting ended at the top of the hour.
* Lloyd reminded Dimitri (who joined late) that the key topic for Wednesday will be the **NCL update and rationale refinement**.
* Next major touchpoint: **Wednesday weekly Budget Committee call**, followed by the **Board meeting on December 11, 2025**.