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Gambling on risk allocation

By Stephen M. Lilienthal
web posted December 19, 2005

"Be Prepared" is more than a motto for Boy Scouts; post-9/11 it should be the guiding principle behind the allocation of Department of Homeland Security ("DHS") dollars. Logic should dictate that the states with the most important and vulnerable terrorist targets should receive more money than states with fewer such targets. A nuclear power plant servicing a populous metropolitan region or a concentration of important strategic industries is of greater economic and strategic importance than a small prairie city. Unfortunately, common sense always does not become public policy.

A wake-up call recently was placed to concerned Americans in the form of a report issued by the National Commission on Terrorist Attacks Upon the United States ("9-11 Commission") chaired by former Governor Thomas H. Kean (R-NJ) and former Representative Lee H. Hamilton (D-IN). The Commission assigned the category "Allocate homeland security funds based on risk" a grade of "F" but said the grade could be raised to an "A" if legislation passed by the House were enacted into law.

The Commission's report includes these cutting remarks:

"Congress has still not changed the underlying statutory authority for homeland security grants, or benchmarks to insure that the funds are used wisely. As a result, homeland security funds continue to be distributed without regard for risk, vulnerability or the consequences of an attack, diluting the national security benefits of this important program."

In recent fiscal years DHS has had one program in which funding was sent to the states and localities based upon risk. That is the Urban Area Security Initiative.

An amendment sponsored by Representative John E. Sweeney (R-NY) and Representative Nita M. Lowey (D-NY) and approved by the House would change the formula to allocate more dollars to areas of definite strategic importance. It was part of the USA PATRIOT and Terrorism Prevention Reauthorization Act of 2005 ("Patriot Act Reauthorization") but is not part of the Conference Report. A bill with similar intent, the Faster and Smarter Funding for First Responders Act of 2005, sponsored by former Representative Christopher Cox (R-CA), at the time Chairman of the House Homeland Security Committee and now Chairman of the Securities and Exchange Committee, was passed by the House by a vote of 409-10. Co-sponsors included Representative Peter T. King (R-NY), Cox's successor as Committee Chairman, and Representative Don Young (R-AK). The Senate has not taken similar action.

The House also had included a risk-based allocation provision in its version of the 9/11 Recommendations Implementation Act, passed last year. However, the provision was deleted by the Joint Conference Committee and, thus, never enacted.

The allocation of DHS grants currently is determined by a formula that provides each state with .75 of grant funds with additional funding determined by population rather than risk. This means a relatively safe state in terms of risk, such as Wyoming, can receive more funds per capita than New York. Sensible allocation based upon threat, vulnerability and consequence simply are not considered in the current allocation of funding.

The Lowey-Sweeney Amendment would establish a formula mandating that the three factors listed above serve as the prime determinants for funding. Under their amendment high-risk states and those with international borders, such as New York, would receive 0.45 percent of the allocation and be eligible for additional funding, while low-risk states would receive 0.25 percent of the allocation. A state's critical infrastructure ranging from agriculture and food supplies to defense industrial base to telecommunications and transportation facilities to national monuments and icons would be considered in determining funding. Sixteen infrastructure components are on the allocation list. Vulnerability to threats such as biological and nuclear terrorism also would be considered.

Sweeney argued shortly after the London bombing that the targets of the most vital importance and vulnerability deserve to have the funding which would assure the most effective protection. "[T]errorists want to hit us where they can inflict the most damage. This means getting funding to where it is needed most, whether that be a port, a small border town, or a big city."

Lowey has argued that states such as Wyoming and North Dakota receive more funds than states that are more populous and have more vulnerable targets. She has said, "States like Wyoming and North Dakota will continue to receive a disproportionate share of funds despite their low-risk status. Federal money is far too critical to be used as another source of pork – one that has purchased bomb-disarming robots for Wyoming, rather than equipment for New York City."

Skeptics may wonder whether the criticism by Lowey and Sweeney merely is reflective of parochialism.

A September 2005 working paper written by Veronique de Rugy of the American Enterprise Institute (AEI), "Is Port Security Spending Making Us More Safe?," examines whether our spending on port security has increased our safety. de Rugy noted that ten ports handle over 40% of the non-North American trade, the bulk moving through Houston, New York and Southern Louisiana. The Ports of Los Angeles and Long Beach handle over 40% of the cargo and 25% of refined energy. "The nation's biggest ports are regarded as high-risk areas," wrote de Rugy. "However, they often receive relatively less grant money than smaller and lower-risk ports." The ports in Guam ($3.196), North Carolina ($0.865) and Hawaii ($0.527) receive proportionately more dollars per ton of cargo than those in Texas ($0.137) Louisiana ($0.105), New York ($0.272) and California ($0.428).

de Rugy argues that money devoted to port security should be apportioned based upon ports of highest consequence rather than the current strategy of spreading money around to many ports. An attack causing the total shutdown of the New York-New Jersey Port could cost as much as $277 million a day, according to statistics released in 2003 by the American Association of Port Authorities. Shut down the ports of Long Beach and Los Angeles and the "trade disruption" could total as much as $600 million daily. de Rugy asserts that "the evidence of misplaced priorities within port security spending also can be found throughout the DHS budget but also government wide. This of course is mainly the result of Congress's tendency to allocate money based on politics rather than security."

Stirring speeches and photo ops to remind Americans of the terrorist threat are not enough in this post-9/11 era. Sound strategic spending of resources is more important than ever in an era of terrorism; valuable government resources, certainly money, cannot be disbursed like fertilizer on a lawn. Congress and the Executive Branch owe it to the American people to assure that the money is spent protecting what is most important to our nation, guarding those cities and facilities and symbols of national importance that are most critical to our well-being. Not everything the 9/11 Commission has recommended is popular in all quarters of American society. On the vital issue of spending homeland defense dollars proportionate to a sound strategic purpose the Commission scored a direct hit.

Stephen M. Lilienthal is a research analyst at the Free Congress Foundation.

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