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COLUMN

Don’t Rush Homeland Security Budget Reform

Dan Barclay

The Department of Homeland Security (DHS) currently distributes funds to the states on the basis of population -- that is, New York, with 31 times the population of neighboring Vermont, receives about 31 times the money to safeguard vulnerable installations from terrorist threats. Such a system is impractical in the long run but acceptable for the time being.

Clearly, the existing population-centered arrangement contains serious flaws. First, it presupposes a linear relationship between a state’s population and its threat level, while that relationship is more likely to be geometric. States with concentrations of people and landmarks face threats disproportionate to their large populations. Given terrorist groups’ limited means, they are extremely unlikely to allocate their energies to a region where only limited damage is possible.

Second, the current policy of granting at least 0.75 percent of total funds to each state exacerbates this disparity. As a result, low-risk states such as Vermont reap a healthy $29 per capita, while New York must make do with $5, below even the national average of $7.

Third, tiny allotments to smaller states are not very effective on their own. Many could probably be safely eliminated, with the federal umbrella sufficient to provide security. These facts argue in favor of a DHS funds allocation mechanism based upon actual risk assessment, not population.

Yet this approach, too, has flaws. First, accurate risk assessments can be notoriously difficult to conduct. Changing the initial assumptions slightly can lead to a range of possible outcomes -- is that threat differential really 51.34, or could it be closer to 54.13? The frequent deficiency of intelligence data compounds the problem of uncertain analysis.

Second, changes in threat levels outpace changes in budgets. Since the DHS’s budget is only updated every fiscal year (aside from the irregular process of supplementals), new intelligence could suggest a different optimal allocation even though the funds are already locked in place.

Third, moving away from the immutable ground of population statistics to the much more uncertain territory of risk assessment introduces the potential for politicization. Analysts could well come under pressure from influential lawmakers to produce reports that exaggerate the danger for a favored state.

This last concern is not unfounded, but based upon a worrisome trend of politicization within the DHS budget. One could say that the DHS, essentially a clearinghouse for information and the domestic responses derived therefrom, has a structure that naturally lends itself to such manipulation. As the most advantageous actions are unclear, actions which are not so advantageous yet nonetheless favored by some interest group can come to the fore.

For example, the current budget includes a $3.3 million increase for the FBI’s Office of Intelligence (responsible for counterterrorism analysis and information-sharing with the CIA and DHS), yet a $35 million increase “to train senior law enforcement in the detection of terrorist groups,” equal to the Office’s entire budget. And if that $43 million for enhancements to the weather radio system is not an urgent priority, then what is? (see http://www.whitehouse.gov/omb/inforeg/2003_combat_terr.pdf)

An implication of this trend is that the current $7 billion of homeland security spending in the Department of Defense is not unjustified, for the DHS has proven its ability to suck in abundant funds without providing commensurate security improvements. Since the DHS is a young, rapidly-growing organization, this problem is exceptionally acute at present. However, as oversight procedures become established, it should lessen with time.

This phenomenon provides a compelling argument for postponing the switch from population-based to threat-based funds allocation until the DHS has sufficiently stabilized so as to lessen the severity of exploitation. Far better to establish an effective system in a few years’ time than a corrupted one now.

In the meantime, it might be possible to bypass the issue entirely by increasing the share of funds distributed directly to cities. But little can be done except maintaining vigilance -- both for terrorist threats and the homeland security budget.