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Homeland Security Funding Shuns Traditional Models

February 2003
By Robert K. Ackerman
E-mail About the Author

No clear pattern yet has emerged to current and future expenditures.

More than 16 months after the September 11, 2001, terrorist attacks, U.S. government spending on homeland security has yet to settle into a predictable routine. Tens of billions of dollars have been allocated to domestic and foreign operations aimed at deterring, preventing or recovering from terrorist activities. Some of these appropriations have funded startup programs that promise long-term benefits, while others support long-extant efforts that are the only options available for immediate action in the war on terrorism.

But, even with this funding producing real progress in the war on terrorism, tracking steady progress in specific program funding remains elusive. Some industry analysts offer that the actual U.S. Defense Department spending growth from homeland security ranges from about $15 billion to $20 billion. The only full-year appropriation is defense and military construction, as all other funding came under an omnibus continuing resolution that ended in January. And, much ambiguity remains over which defense programs fall in the category of homeland security and which ones are categorized as combating terrorism overseas.

Most of the funds allocated since September 11 have been spent on one-time expenditures. These include relief for New York as well as other homeland security measures such as establishing vital materiel and medical stockpiles. Only about 10 to 20 percent of the homeland security funding allocated over the past 16 months represents increases that will be sustained over the near- and long-term future.

“Clearly, the Department of Defense, as well as the Department of Homeland Security, has seen a ratcheting up of funding for programs that they clearly expect will remain at that higher level over a continuing period of time,” says one industry analyst.

“There is real money here, folks,” the analyst continues. “This is not phony money; this is not flimflam money. There is real money in homeland security. This is the first time the federal budget has shown serious increases since we began focusing on deficit-cutting in the late 1980s.”

In some cases, the fastest way to get results was to fund existing lines. Many programs, such as the biodefense initiative, are facing difficulties becoming established because they had no pre-existing programs. So, funding instead goes into existing programs that can produce some results immediately. One analyst offers that, while a few new programs are listed in fiscal year (FY) 2003, more will begin to appear in 2004.

Amounts for homeland security have changed as original needs were met and priorities redefined. G. William Hoagland, staff director of the U.S. Senate Budget Committee, explains that $13 billion of the $40 billion approved immediately after the September 11 attacks went for homeland security missions. The bulk of the remaining $27 billion went to direct and indirect military operations and disaster relief and recovery work in New York.

Hoagland divides FY 2002 homeland security spending into three categories that reflect the mission of the new Department of Homeland Security. He offers that about 42 percent was devoted to the first category—prevention. This $18 billion amount represents a 60 percent increase in federal resources devoted to this category compared with spending before the September 11 attacks. He characterizes prevention as spending for investigations, intelligence and offensive activities.

Roughly 40 percent went to protection, which he defines as programs that provide physical security to government facilities, critical infrastructure, government employees and the public at large. This amount, $15 billion, represents a 50 percent increase, and it largely was spent on the Transportation Security Administration, border agencies, the U.S. Coast Guard, telecommunications protection, the Environmental Protection Agency and other government organizations.

Hoagland’s third category is minimization, and he concludes that it received a little less than 20 percent of the total 2002 homeland security funding. This category focuses on preparations to minimize the damage from attacks and improve recovery, and its primary recipients are the Department of Health and Human Services, the Federal Emergency Management Agency (FEMA) and the Centers for Disease Control and Prevention, among others. Its funding now is about $10 billion—more than quadruple the amount spent prior to the attacks.

After the September 11 events, the federal government rewrote its definition of homeland security funding. This redefinition leads to an apples-and-oranges analogy when comparing pre- and post-September-11 homeland security funding. Comparing the growth of this spending over the past several years requires reassessing the previous years based on the new definitions. A General Accounting Office report in November 2002 called for the administration to establish a standard for reporting homeland security programs so that these programs can be tracked over time.

A study authored by Steven Kosiak at the Center for Strategic and Budgetary Analysis (CSBA) reflects past and current homeland security spending patterns fairly accurately, industry analysts say. This study, which applies the new definition of homeland security spending to past years, reports that the Office of Management and Budget (OMB) estimated that federal appropriations totaled $20 billion in FY 2001, $24.2 billion in FY 2002 and $44.8 billion in FY 2003.

The OMB estimate included funding for combat air patrols. Separately, the Defense Department requested $20.1 billion for the Defense Emergency Response Fund, of which Congress rejected about $10 billion. This effectively left other Defense Department funding, which was spread over several areas, at $8.2 billion, all in FY 2003.

A September 2001 emergency supplemental appropriation totaled $20 billion. Another supplemental appropriation in January 2002 provided $20 billion that went into the FY 2002 Defense Appropriations Act. An August 2002 supplemental appropriation provided $24 billion to deal with various contingencies.

These annual and supplemental appropriations add up to $40 billion in FY 2001, $68.2 billion in FY 2002 and $53 billion in FY 2003. In addition to these appropriations, fee collections—primarily from the Air Transportation Safety and System Stability Act—added to the appropriation amounts. This direct spending provided an additional $5.2 billion in FY 2001 and $3 billion in FY 2002, and it will add $2.7 billion in FY 2003, according to the CSBA.

One industry analyst notes that the supplemental appropriations provided the government with much greater flexibility in allocating funds. This flexibility came in handy early in the war on terrorism, especially in operating and maintaining forces active in that war.

The analyst adds that the Defense Department has applied its funding to a number of activities. However, on the civil government side, the private sector has been handicapped by the OMB’s holding back of technology investment until the new Homeland Security Department is up and running.

With an eye on the new Homeland Security Department, OMB has issued its own figures by breaking down homeland security funding into two subcategories of activities. One is called the homeland security bureau, and the other is the overseas combating terrorism bureau. These two distinctions recognize the different roles being undertaken in securing the homeland and in pursuing terrorists overseas.

The OMB’s homeland security bureau subcategory is roughly equivalent to the new Department of Homeland Security. Its proposed FY 2003 funding stands at $37.8 billion, which would be the budget for the new department. In terms of tracking, these same guidelines list actual FY 2001 funding at $15.9 billion and enacted FY 2002 funding at $19.6 billion. Emergency response funds, which largely come from the supplemental funding category, add up to about $10.7 billion, which would bring the FY 2002 total to $30.3 billion.

Money for the overseas combating terrorism bureau includes funding for the Energy Department, the State Department, the U.S. Agency for International Development and national security. Actual funding for these four categories was $4.9 billion in FY 2001, and enacted FY 2002 funding totaled $5.5 billion. Adding the emergency response funds brings the FY 2002 budget to $7.6 billion. The president’s FY 2003 budget for this bureau provides $8.5 billion.

Adding the $37.8 billion homeland funding and the $8.5 billion overseas funding brings the FY 2003 total to $46.3 billion.

Even with proper comparative metrics among the different fiscal years, marking the evolution of homeland security spending does not always provide an accurate indication of funding priorities or trends. A sudden funding drop from one year to the next may reflect the passing of one-time startup costs of a new entity or activity.

Homeland security funding can be broken down into several different subsets. Among these, spending for intelligence and information technology grows by more than 200 percent from $230 million in FY 2002 to $722 million in FY 2003. Cyberspace security was this category’s top subset in 2002, as it received $197 million. Of that amount, $133 million went to the National Infrastructure Protection Center (NIPC).

Most of the large 2003 increase for intelligence and information technology came from $380 million allocated to the Immigration and Nationalization Service/Justice Department entry/exit visa system initiative. This is up from only $30 million in 2002. Funding for the NIPC declines slightly to $125 million.

Among new intelligence and information technology funding for 2003, the largest effort is $60 million for the Defense Department’s priority wireless access. The Defense Department’s cyberwarning intelligence network receives $30 million, and the Energy Department’s National Infrastructure Simulation and Analysis Center receives $20 million. All three new items fall under the cyberspace security subset. A fourth large 2003 startup is the Commerce Department’s information sharing plan for assured information access across federal databases, which receives $20 million.

Aviation security continues to receive considerable sums of money. This subset received $2.6 billion in FY 2002 funding, which was spurred by a supplemental budget appropriation of $1 billion. For FY 2003, funding currently is set at $4.8 billion. This increase largely reflects money earmarked for the Transportation Security Administration, which jumps from $95 million to $2.5 billion. Fees from this administration are budgeted to grow from $1.2 billion in 2002 to $2.3 billion in 2003.

State and local governments received approximately $1 billion in federal FY 2002 funding in pass-through grants from the Department of Health and Human Services and its Health Resources and Services Administration for hospitals and countering bioterrorism. This amount rises to $1.6 billion in FY 2003. These governments were to receive approximately $3.5 billion from FEMA, but that funding now will come from the new Homeland Security Department, and it currently is delayed while the new department is being organized.

The $1 billion spreads thinly when divided among the 50 states and the District of Columbia. While individual state amounts differ based on population and particular needs, on average each state receives only $20 million. According to industry figures, California, the most populous state, tops the list at $71 million. Texas is second with $60 million, and Florida is third at $47 million. At the bottom of the list are several states receiving $7 million. Some states may be using this funding for related, but everyday, needs such as new fire trucks and radio systems, some analysts believe.

Homeland security spending on border security grows from $9.9 billion in FY 2002 to $10.6 billion in FY 2003. The biggest increase is for the Coast Guard’s efforts in ports, waterways and coastal security, which grows from $682 million to $1.2 billion. Funding for many other Coast Guard programs drops nearly 50 percent, however. Interdiction activity will see a 25 percent reduction in funding.

Another sizable increase goes to the Customs Service for inspections. Funding for maritime security grows from $464 million to $684 million. Northern border security also increases from $649 million to $744 million. The total for Customs Service homeland security funding increases 12 percent to $2.3 billion in FY 2003.

The largest funding bloc in the border security subset goes to the Immigration and Naturalization Service for enforcement. Border Patrol funding grows from $1.3 billion in 2002 to almost $1.5 billion in 2003. Inspections spending increases from $946 million to $1 billion over the same period, while detention and deportation funding also grows from $1 billion to $1.1 billion.

Countering bioterrorism consumes a significant portion of homeland security dollars. The Health and Human Services and Homeland Security departments are required to develop a coordinated plan for research and development to counter bioterrorist threats. Meanwhile, the Department of Health and Human Services continues to receive substantial funding for bioterrorism defense research and development that is not included in Homeland Security or Defense Department budgeting.

For FY 2002, the final total for bioterrorism defense was $5.2 billion. This is budgeted to increase to $5.9 billion in 2003. Research and development grows from $581 million in 2002 to $2.4 billion in 2003, with $1.1 billion going to basic and applied biodefense research. Other major bioterrorism research elements include Anthrax vaccine development—up from $18 million to $268 million—and the biodefense research infrastructure—up from $70 million to $336 million. Two Defense Department efforts grow from no 2002 funding at all. Bioweapons defense and countermeasures receives $120 million, and agent identification, detection and area monitoring receives $300 million in 2003.

On a percentage basis, the greatest growth in bioterrorism defense occurs in the subset of enhancing medical communications and surveillance. Major leaps in spending for information/communications systems and medical surveillance systems boosted funding from $74 million in 2002 to $392 million in 2003—a 430 percent increase.

Funding for strengthening state and local health systems shows slight overall growth from $1 billion to $1.2 billion, with some areas showing a 2002 start-up funding bubble while others are receiving their first amounts in 2003. Many bioterrorism preparedness items achieved their goals in 2002, so funding in this subset dropped from $2.7 billion in that year to $1.2 billion in 2003. For example, this decline includes the 2002 budget of $675 million for the decontamination of anthrax-ridden U.S. Postal Service assets, which is largely complete and receives no funding in 2003.