Thick or Thin

Homeland Security officials wrestle with the best way to spread grant money among cities and states.

Colchester is a small town just outside Burlington, Vt.

It has slightly more than 17,000 people. The town's government has an annual operating budget of about $9 million. And courtesy of a federal homeland security grant program, Colchester now has a $58,000 piece of technology for emergencies: a search-and-rescue vehicle that can bore through concrete.

Presumably, city officials could use the vehicle to search for survivors in the rubble of a collapsed building, although Vermont isn't on a fault line and it's difficult to imagine terrorists targeting the Burnham Library.

This purchase is one of many frequently cited examples of what critics see as extremely wasteful federal homeland security grant programs. The list goes on.

A $180,000 DHS grant went to a port that was so remote it receives only 20 ships a year. And it's not simply a case of federal dollars going to small and remote areas. Washington used homeland security funds to pay for long-promised programs loosely or dubiously tied to counterterrorism: a car-towing system or a summer jobs program, for example.

Homeland Security Department officials are familiar with all the glaring examples of misspent funds-they've made the department an easy target for ridicule. But DHS has been remodeling its grant programs in ways that even some critics acknowledge make sense. And with the July announcement of $1.7 billion in grants to state and local governments-in particular, $746 million earmarked for high-risk urban areas-DHS officials say they have solved the problems that have invited criticism. Department leaders believe they've settled upon the right system-one that focuses spending on the highest risk cities at the expense of less populous, more remote areas.

Spread Too Thin

Homeland security grants for years have been rapped by auditors, congressional committees and others. Investigative reports are replete with colorful examples of wasteful spending. For example, in April 2004, the House Select Committee on Homeland Security found that Lake County, Tenn., had used $30,000 in federal homeland security grant money to buy a defibrillator for a high school basketball tournament. Congressional Quarterly reported in 2003 that 1,570-person North Pole, Alaska, received $557,000 for communication and rescue equipment.

Some investments appear to be unjustified; others simply fail the common-sense test. Either way, these examples serve to bolster critics' primary argument against the grant programs: DHS and Congress are merely throwing money-exorbitant sums of money-at security problems without any cost-benefit analyses to help guide smart investments.

DHS has no way to assess how the $23 billion it has given state and local entities since 2001 has reduced risk, according to a February 2007 report by the Congressional Research Service. Reportedly, less than half of that money has been spent and a third remains unobligated. Secretary Michael Chertoff says that is not as bad as it sounds, because cities and states still have to solicit bids, judge competing offers and test the products before awarding the grant money they have received. "The fruits of that money are going to be rolled out over the next couple of years so the public is going to see a lot of benefit from . . . the $23 billion," Chertoff said at a July 18 press conference announcing the 2007 grants for high-risk urban areas.

Veronique de Rugy is a senior research fellow at George Mason University's Mercatus Center. In 2005, she deeply probed homeland security budgets for the American Enterprise Institute for Public Policy Research and published her findings in a 42-page report titled "What Does Homeland Security Spending Buy?" She concluded that most homeland security spending actually does little to reduce the risk of terrorism and instead is motivated mostly by politics-the need of federal lawmakers, for example, to be perceived as doing something to counter the latest security threat in the news.

What irks de Rugy most is the use of mandatory minimum grant amounts, which Congress made as a part of security grant funding from the start. By requiring that large portions of security dollars be distributed evenly among states, localities and other recipients, Congress guaranteed that the money would be spread too thinly to do any good, critics say. James Carafano, senior research fellow at the Heritage Foundation, compares the hundreds of relatively small grants to France's unsuccessful defenses prior to World War II. "Trying to turn every port and crossing site into a little Maginot line is a losing strategy," he says, referring to the ground-based fortifications France built along its eastern border after World War I, which German troops later sidestepped as they invaded from the north.

De Rugy believes rural areas receive a disproportionate share of federal funds. Terrorists on occasion have targeted areas outside New York, Washington and the other most populated, highest risk urban centers, notably in the 1995 Oklahoma City bombing. Still, the government can't protect every potential target, so de Rugy and others say the only sensible strategy is to target limited federal funds at the most cost-effective projects-that is, where investment will most reduce the risk of terrorism.

Homeland Security's Urban Areas Security Initiative program was supposed to address such criticisms. For one thing, potential recipients compete for funding. And as its name suggests, the program is intended to support the planning, equipment and training needs of the most likely to be targeted, most densely populated urban areas.

Initially, seven cities were recipients: New York, Washington, Los Angeles, Seattle, Chicago, San Francisco and Houston. Later, reportedly after complaints from local officials, the list expanded to include 30 more areas and, in 2005, 50 areas. Each expansion cut into the funding received by cities like New York. "This is supposed to be going to the high-risk cities," de Rugy says. "There aren't 100 of them . . . You don't need every little city to be equipped with everything."

Last year, DHS ignited a political firestorm when it announced that New York and the Washington region would receive 40 percent less than in 2005 (the awards actually amounted to a 26 percent reduction in their share). The grant program was cut 14 percent between 2005 and 2006.

Then-Senate Minority Leader Harry Reid, D-Nev., called for DHS Secretary Chertoff's resignation after the department removed Las Vegas from the list of 35 cities eligible for urban initiative funding in 2006. Other lawmakers also complained. In some ways, these complaints were unfair, or at least unworthy of substantial attention. After all, while it might be the lawmakers' job to argue for their constituencies, it is Homeland Security's job to ignore politics and award funds based on risk.

"I have to be very clear about this: The purpose of the UASI program, indeed, the purpose of all homeland security funding, is not to generate popularity for the secretary or for the Department of Homeland Security," Chertoff said in 2006. "It is to address the highest priorities driven by an analytic, risk-based process. UASI funds are not entitlements."

On the other hand, some of the decisions were difficult to explain. New York and Washington rank as the areas most at risk of terrorism. Las Vegas, Reid pointed out, had more visitors on New Year's Eve than New York City. A list of critical infrastructure considered in calculating where to award grants was mocked for including a popcorn factory and a hot dog stand. And another list showed New York as containing only two landmarks.

Matt A. Mayer headed DHS' grants wing as executive director of the Office of State and Local Government Coordination and Preparedness before becoming a counselor to DHS Deputy Secretary Michael Jackson in July 2005. He says the department had been using more and more de-tailed data in its calculations and his team was developing a system that would have evaluated grant applications based on whether or not they built one of the critical capabilities on a nationwide list generated by DHS. But that part of the system never came to fruition, he says, and the current one is not based on the Targeted Capabilities List. Mayer attributes last year's controversy to the department's lack of an objective criterion, such as the Targeted Capabilities List, for evaluating applications. With a clear criterion, the department would be able to justify its funding decisions more easily.

Considering Consequences

To distribute $746.9 million in 2007 UASI awards, DHS simplified things. Chertoff said that last year, the department did too much bean counting-collecting bundles of information, much of it only minimally helpful and often obscuring the larger picture. The list of critical infrastructure that identified more than 200,000 items last year now contains only about 2,000, all of unquestionable importance, the secretary says.

"This is not petting zoos, popcorn factories or ice cream parlors," he said in July. "This is about 2,000 of the most important infrastructure in this entire country: major power plants, major switching stations, dams, bridges-the kinds of things that if they go out are going to have a regional or national impact." DHS has stopped counting landmarks and icons altogether; they added little value and "a lot of heartburn," Chertoff says.

Instead, DHS has a new mathematical weighting system. Forty percent of a grant applicant's score is tied to population and population density, because protecting people and mitigating the impact of terrorism on people are the department's top priorities. Twenty percent is based on threat analysis; threats change so often that assigning them too much weight would risk focusing spending on "last year's battles," Chertoff says.

Another 20 percent is tied to economic data that captures the potential financial impact of terrorism. Critical infrastructure counts for 15 percent, and 5 percent is tied to whether the area has military installations, is near the border or has other national security implications. Implicit in these calculations is the revised assumption that all areas of the country are equally vulnerable to attack. So in the definition of risk that Chertoff introduced in a speech in February 2005-risk equals threat times vulnerability times consequence; consequence now is heavily weighted.

"We are past the point of arguing about whether our methodology or calculations are right," Chertoff said in July. "I think most people I've talked to understand that given what our philosophy is here that we are calculating these things correctly." The philosophy is to concentrate most of the grant money in highest risk cities, with second-tier cities receiving a lesser but still significant share. That means New York, the National Capital Region and the other four highest risk areas shared 55 percent of the $746.9 million pie. The 39 other eligible cities share 45 percent of the funding.

Prior to this year, DHS spent 53 percent on the top-tier cities. But Mayer says using preset percentages is problematic for the same reason using mandatory minimums is.

It is impossible to know whether the historical 53 percent is too much money or too little for the top-tier because the spending has not been tied to specific capabilities.

"We have no real basis [for saying] that past allocations are a good benchmark for future allocations because we could have been over- or underinvesting, given the absence of the capabilities benchmark," he says.

Not Entitlements

In a Heritage Foundation paper published earlier this year, Mayer and Carafano argued again for a grants system based on the list of targeted capabilities. Applications would be judged by four questions:

• Would the funding request build a capability on the list?
• Does the jurisdiction need that capability? (Des Moines, Iowa, probably does not need a top-tier urban search-and-rescue team as New York City would.)
• Would the request close an existing capability gap?
• And is closing this gap in this area important enough relative to other priorities to justify investment?

To answer these questions, Mayer and Carafano say DHS needs to conduct a nationwide assessment of capabilities, which it has not done since 2003.

For her part, de Rugy says the current system is better than last year's, and admits it might be the best DHS can pull off. But she still thinks it allocates far too much money, and that now it's time for states and localities to begin paying for their own security needs. Federal grants provide incentives for state and local entities to seek as much security funding as they can; local or state-run programs would encourage governments to prioritize their security needs and allocate scarce funds to maximum effect.

"I think they should just get rid of these grants," de Rugy says. "It's been five years."

Chertoff might not disagree completely. In explaining the awards this year, he said communities should expect to get fewer federal dollars as they build the capabilities the grants are intended to bolster. "These grants are meant to be investments in capital," he said. "They are meant to build capabilities. They are not meant to be annuities or entitlements where you get the same amount every year like a Social Security check."

Risk-Based Funding

After complaints that homeland security grants were awarded unfairly, the Homeland Security Department now evaluates cities' and states' needs based on population size and density, threat analysis, potential financial impact, presence of critical infrastructure and national security implications. Here's a look at the variance in state homeland security grants.

Total State Homeland Security Grant awards, fiscal 2002-2007

Source: Homeland Security Department, U.S. Census