Terrorism Risk vs. Reward

Since Sept. 11, communities across the country have purchased a long list of emergency response equipment-everything from defibrillators to decontamination units-using federal grants.

But those communities aren't equally vulnerable to terrorism. Economist Veronique De Rugy would like Congress to change the formulas that allow arguably low-risk places, such as Outagamie County, Wis., population 167,000, to receive $500,000 in federal grants to spend on chemical suits, generators, rescue saws, disaster-response trailers, emergency lighting, escape hoods and a bomb disposal vehicle.

In a recent research paper-"What Does Homeland Security Spending Buy?"-De Rugy, a fellow at the American Enterprise Institute, a think tank based in Washington, argues that limited homeland security funds should be reserved for intelligence gathering and terrorist interdiction "instead of subsidizing local fire stations."

Following the Sept. 11 terrorist attacks, federal first-responder money channeled to state and local governments soared, rising from $2.7 billion in fiscal 2001 to a projected $5.5 billion in fiscal 2005, De Rugy estimates. James Krouse, an analyst at INPUT, a Reston, Va., market research firm, predicts this funding is likely to decline under pressure from the Bush administration. In a policy statement released during the 2004 appropriations process, the administration urged lawmakers to pare back spending on first responders and "focus . . . grant funds on areas of the highest threat."

Congress is considering changes to distribution formulas, but there's little sign that lawmakers are eager to curb grants. Legislators allotted $4 billion to state and local emergency response grants in the Homeland Security Department's fiscal 2005 appropriations bill, exceeding President Bush's budget request by $400 million.

As grants to states and localities grow, troubling tendencies emerge, De Rugy says. At least three major departments-Homeland Security, Justice, and Health and Human Services-and several offices within each of those departments, administer 16 overlapping first-responder grant programs, she notes.

The grant distribution also fails to adequately distinguish between high- and low-risk regions, she says. The current formula for the State Homeland Security Grant Program instructs DHS' Office for Domestic Preparedness to distribute 40 percent of grant funds evenly across states and to divvy up the remainder based on population.

The Virgin Islands, Guam, Northern Mariana Islands, Wyoming, and American Samoa received the most money per capita ($97, $84, $50, $35 and $35, respectively) in fiscal 2003. The District of Columbia fared relatively well, ranking sixth with $31.50 per resident. But New York received $5.05 per person that year, the third-lowest amount of any state.

Grants to state and local first responders "should only be distributed based on an evaluation of risk and security need and nothing else," De Rugy writes. Leaders of the House Select Committee on Homeland Security appear to agree. They crafted a bill to change the formula for the DHS state grant program. The bipartisan proposal, introduced as stand-alone legislation late last year and later wrapped into the House intelligence reform bill, allots each state a minimum of 0.25 percent of available funds. Beyond that, grants would be allocated based on demonstrated risk.

Committee Chairman Rep. Christopher Cox, R-Calif., cites De Rugy's report as an affirmation of "what this committee and the first-responder community have been saying for the past two years-the status quo simply does not serve our homeland security needs." A Democratic congressional staffer, who requested anonymity, says committee members wanted to base the state grant formula entirely on risk, but included the guaranteed minimum funding to please lawmakers on other committees.

With the intelligence reform legislation stalled as the 108th Congress recessed for Thanksgiving, the fate of the House proposal remained undecided.