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Unlocking the Federal Treasure Chest

The new federal budget for FY 2007 contains numerous cuts, yet homeland security funding continues to grow.

By Alan S. Brown

Going into the new year, the new federal budget for FY 2007, which begins this June 30, lays aside $41.6 billion for all nondefense homeland security. This is 8 percent higher than FY 2006 and three times more than before 9/11.

Two-thirds of those funds will flow through the Department of Homeland Security (DHS). In his new budget, President George Bush is asking for $35.6 billion, up 7 percent from the amount Congress funded in FY2006. This is roughly twice as high as FY 2002, when DHS was not yet a cabinet-level department and its 22 agencies operated separately. Yet it is significantly less than the $41.1 billion the president proposed for DHS in FY 2005.

Most of the budget goes to DHS agencies with responsibility for monitoring and interdiction. These include the Coast Guard ($7.1 billion), Customs and Border Protection ($6.6 billion), Transportation Security Administration (TSA, $6.2 billion), Immigration and Customs Enforcement ($4.4 billion) and Federal Emergency Management Agency (FEMA, $3.1 billion).

DHS funnels most of its aid to states and municipalities through the Preparedness Directorate. Its budget will decline 15 percent to $3.4 billion. In case anyone misses the point, the new budget discusses preparedness under the heading "Restraining Spending and Managing for Results."

Treasure Chest

In the past, the rapidly rising DHS budget proved a treasure chest for state and local governments and the companies that supply them. Over the past four years, DHS has funneled more than $14 billion, including $2.5 billion under the FY 2006 Homeland Security Grant Program, to the states. States received the money and then dispersed it to upgrade responder capabilities based on their assessment of needs.

The cynical might say the Congressional formula to disperse money to the states turned firehouse politics into law. It simply divided half the funds evenly among all 50 states and allocated the other based on population. This sent disproportionate funds to small states, says Tim Ransdell, executive director of the California Institute for Federal Policy Research. In FY 2004, for example, Wyoming received $38 per person while California got only $5 per person.

The funds sent to states were not a blank check, but they were close. Early DHS policy emphasized all-hazards preparedness, the ability to respond to everything from floods and earthquakes to terrorist attacks and derailments. Its goal was to upgrade equipment, capabilities and training so responders could work together in large teams to respond to a terrorist attack.

Financially strapped communities suddenly found they could not only buy new hazmat suits, multigas sensors and decontamination units but also personal armor, radios and computer systems. Local fire departments bought so many new fire trucks that manufacturers who had been begging for work suddenly found themselves with a three-year backlog on new orders.

"The first thing we did after 9/11 was to throw money at the problem," says James Carafano, a senior fellow at The Heritage Foundation, a conservative Washington think tank. "There were no priorities, standards or plans. A lot of that money was simply wasted. You can't buy your way out of this problem, and you can't give every state and municipal government whatever they want. You have to look at how effectively you spend it."

"It's a black hole," opines Dave McIntyre, director of Texas A&M University's Integrative Center for Homeland Security. "There's no such thing as enough money, especially when someone else is paying the bill."

Last year's budget heralded an end to those free-spending ways. It imposed strategic goals and standards. More significantly, it dispersed more than half of DHS's State Homeland Security Grants based on risk and threat. It also refocused the efforts of most DHS agencies on interdiction and monitoring.

As a result, finding the federal treasure chest has grown more complicated than in the past. It requires a good treasure map. The DHS budget is that map. It holds all the clues to changing DHS priorities.


DHS has been rethinking priorities since 2004. The process picked up steam last July, when new DHS Secretary Michael Chertoff announced a six-point agenda to make DHS more responsive to changing threats. It called for: (1) improved preparedness, especially for catastrophic events; (2) better transportation security systems for people and cargo; (3) stronger border security, visa enforcement, and immigration reforms; (4) enhanced information sharing with partners; (5) improved department management; and (6) a DHS reorganization to implement these changes.

Chertoff said the reorganization would give the department a greater sense of urgency and improve coordination and information-sharing. The remake also appears an effort to stamp a single identity on DHS's 22 separate agencies.

Many of the changes consolidated power at the department's executive levels. A new Operations Directorate oversees DHS's response to new intelligence. The new Policy Directorate takes over this function from the Border and Transportation Security Directorate. A new Office of Intelligence and Analysis ensures that all field information goes to all relevant agencies.

Chertoff also transformed the old Information Analysis and Infrastructure Directorate into the new Preparedness Directorate. It now has responsibility for state and local government grants, training, exercises, cyber security, infrastructure protection and response to biological attacks.


These priorities underscore a shift in emphasis from stopping another 9/11 to preventing something much worse. Certainly, DHS still puts an enormous amount of resources into inspecting airport passengers and luggage and monitoring foreign nationals inside the United States. Yet the unspoken reasoning behind increased spending on border protection is to stop weapons of mass destruction (WMD) from ever getting into the country.

"Biological and nuclear weapons could change the nation overnight," says McIntyre. "I'm pleased that DHS has shifted resources to those areas." Carafano agrees, and supports funding for interdiction. "The best way to fight terror is to prevent it," he explains, "That means shifting resources to border patrols, port security, Coast Guard and intelligence."

DHS has been moving in that direction. The FY 2006 budget established the Domestic Nuclear Detection Office to detect attempts to import, assemble or transport nuclear or dirty bombs. It will receive $536 million in the FY 2007 budget, up from $315 million in FY 2006. It plans to spend $178 million to deploy radiation monitors at strategic U.S. ports and points of entry.

Most first-generation detectors only work at close range. More sensitive detectors that work at greater distances are among DHS's top research priorities, says Kei Koizumi, who monitors the federal government's R&D budget for the American Association for the Advancement of Science. Under the FY 2007 budget, the Domestic Nuclear Detection Office will spend $100 million on better sensors to detect and identify the origins of nuclear materials.

The Chertoff reorganization also established a Chief Medical Officer to coordinate the DHS response to biological attacks with the Department of Health and Human Services, Centers for Disease Control and National Institutes of Health. In FY 2005, DHS spent $2.5 billion on Project Bioshield to purchase new WMD vaccines and speed the nation's ability to develop countermeasures.


The FY 2007 budget emphasizes border security. On sea, it asks for a 4 percent funding increase to $7.1 billion for the Coast Guard. This follows an 8 percent increase in FY 2006 and represents an 87 percent rise since 2001. This year's funding includes $935 million for fleet renovations, part of a 20-year recapitalization program. In addition to ports, waterways and coastal security, the Coast Guard will take over air defense of the nation's capital.

On land, funds for border security and immigration enforcement have risen more than 90 percent since 2001. The FY 2007 budget calls increases of 6 percent to $6.6 billion for Customs and Border Protection and 22 percent to $4.4 billion for Immigration and Customs Enforcement.

The new budget boosts Border Patrol funding by 29 percent to more than $3 billion. This will fund 1,500 new agents and new technology to detect illegal crossings and smuggling. Another $2.1 billion will go to detention facilities and faster processing so DHS can hold and deport aliens in 15 days rather than release them on a promise to appear in court. Because businesses from farms to hotels rely on foreign workers, DHS will also introduce a temporary worker program to give aliens a legal way to work here.

DHS also plans to complete its five-year, $560 million initiative to slash immigration application delays to six months. It will also put aside $399 million for US-VISIT, which screens travelers from other countries. This year, the program will begin asking for all 10 fingerprints and integrate its fingerprint database with that of the FBI.

Funding for the TSA is slated to rise 6 percent to $6.2 billion, including $3.7 billion for passenger and baggage screening. The agency has about 45,000 federal screeners and operates 10,000 screening devices. It plans to invest $100 million in new air cargo systems, $690 million in baggage units and more than $80 million for passenger firearms and explosives detectors and other new technologies. TSA expects to recover 70 percent of its costs by doubling the airport security fee to $5 per one-way trip.

DHS's definition of borders also extends to cyberspace. In 2003, it created the National Cyber Security Division (NCSD), which will receive $93 million in FY 2007. NCSD analyzes malicious code, reviews software vulnerabilities, analyzes threats to utility and industrial control systems and conducts national cyber readiness exercises.

The priorities of DHS's 22 agencies have proven a treasure chest for private enterprise. Unlike the military, where mega-contractors are the rule, DHS buys from a broad range of firms. Security firms that sell technology, such as sensors, airport baggage screening equipment, explosive detectors, fingerprint and biometric devices, smart cards and surveillance systems, have done well. Companies that provide computers, database and networking services and other information-sharing technology have also prospered.

DHS's priority has also benefited small research firms. Its R&D budget, $1.4 billion in FY 2006 and at least $1.1 billion in FY 2007, focuses on nuclear, radiological and biological detectors and countermeasures. "The emphasis is on development rather than pure research," says Koizumi. "DHS wants to get working technology into the hands of responders." Other agencies, such as the Department of Energy and the National Institutes of Health, do more basic research.

States of Preparedness

DHS funds most preparedness efforts through FEMA and the Preparedness Directorate. The latter, which sends grants to states and municipalities, saw its budget slashed 15 percent this year to $3.4 billion.

The budget includes $838 million for Urban Area Security Grants; $633 million for State Homeland Security Grants (down $305 million from one year ago); $170 million for Emergency Management Performance Grants; and $35 million for Citizen Corps. The FY 2007 budget also sets aside $600 million for the Targeted Infrastructure Protection grant program, which Congress did not fund in FY 2006.

Preparedness funding has changed dramatically. FY 2006 marked the first time DHS allocated more than half its state money on the basis of risk and need. This made a difference to at-risk states. "California, with 12 percent of the U.S. population, half the Pacific Coast and a long border with Mexico now receives 10 percent to 11 percent of the total pot, compared with 8 percent in the past," says Ransdell.

DHS also expects more accountability from the states. It admits that it has had trouble measuring the impact and results of the $6 billion it awarded state programs between 2002 and 2006. DHS expects future funding to support its eight national priorities and 37 target capabilities. It spells these out in the FY 2006 Homeland Security Grant Program: Program Guidance and Application Kit, issued in December 2005.

At the top of its list are three "overarching" priorities:

  • Improve regional collaboration, including formal mutual aid agreements and joint exercises;
  • Implement the National Incident Management System (NIMS) and National Response Plan (NRP) to give responders a common vocabulary and approach so they can work together on major incidents; and
  • Continue development the National Infrastructure Protection Plan (NIPP), an ongoing security assessment of critical infrastructure and resources.

DHS also has four capability-specific priorities. They are:

  • Improve state and local ability to share information and collaborate with organizations at all levels;
  • Enhance interoperable communications through standardization of procedures and technology;
  • Strengthen chemical, biological, radiological/nuclear (CBRNE) detection, response and decontamination capabilities; and
  • Upgrade medical surge and mass prophylaxis capabilities to cope with biological weapons or natural plagues.

DHS wants all states and cities to align their plans with these priorities while targeting 37 specific capabilities. These range from such common capabilities as planning and communications to prevention, protection, recovery and response.

DHS also added an eighth priority after the poor responses to Hurricanes Katrina and Rita. It admits that the current model for disaster response and recovery, which assumes people will quickly return and begin rebuilding, has proven inadequate. It has ordered a full-scale review of all federal, state and local catastrophe planning, including mass evacuation planning. It is too early to tell how the reevaluation will play out.


The new DHS budget spells out its new strategies. Yet they are likely to change over time as our understanding of the threat evolves. They are also subject to the internal politics of DHS's competing factions - a real problem in a department created by merging 22 separate agencies - and the external politics of a Congress that responds to public pressure in ways that may cloud broader strategic priorities.

Clearly, the discussion about risk has not yet ended. McIntyre, for example, wants to see cities pay for more of their own security needs. "If Orlando and Kansas City send money to Washington for an aircraft carrier, that aircraft carrier protects everyone in both cities," he says. "But if Washington sends that money to Orlando, how does it help Kansas City?"

Others believe preparedness is underfunded. P.J. Crowley, a senior fellow at the Center for American Progress, a liberal-leaning think tank, notes that Congress cut support to first responders in FY 2006 by 17 percent to $3.3 billion, half of what the nation spends each month in Iraq. "Based on what we've seen in Madrid, London and Aman, major population centers with visible landmarks are targets, yet we're cutting funding. Chertoff is saying the right things, but he's not necessarily backing it up."

Crowley worries about changing threats. "The danger, to me, is that the perpetrators in Iraq have switched from quality to quantity. They think small. Instead of fuel-loaded airliners, we're seeing backpacks and vehicles loaded with explosives. There's a risk that we're not assigning enough resources to the actual threat we're going to see in the United States."

He also wants Congress to do more to protect critical infrastructure. Last year, he notes, Congress rejected a $1.4 billion bill to improve rail and transit security and set aside only $150 million. "That's about $5 million for each major metropolitan transit system," he says. "You can't do a comprehensive security program - patrols, police dogs, video surveillance, access controls - with that kind of money."

Port security is another vulnerability, he says. DHS will provide only $175 million in port security grants in FY 2006. "To fully implement port security, you can't get there from here," he says. Only the ports of Los Angeles and Long Beach make money. Other ports require state subsidies and are not going to pour money needed for day-to-day operations into security upgrades. If they don't make the upgrades, everyone may be vulnerable eventually.

"If we're really in the midst of a war against terrorism, then the federal government should get us to a higher level of security as quickly as possible and then ask the states and local governments to sustain that," says Crowley.

This type of political back and forth is likely to set the agenda for years to come. Questions about risk and funding get worked out in budget debates. Which is why states, municipalities and companies seeking the treasure chest are likely to spend a lot of time interpreting clues. HLR

Alan Brown is a contributing editor.

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