House Approves Homeland Security Appropriations Conference Report Allowing Administration to Allocate a Portion of Formula Funds to States Based on Terror Threat and Risk

            By a vote of 347-70 on Thursday, October 6, 2005, the House of Representatives adopted, H.Rept. 109-241, the conference report to accompany H.R. 2360, the bill providing FY 2006 appropriations for the Department of Homeland Security and Related Agencies. The Senate was expected to take up and pass the bill on Friday, October 7.

            The bill includes $30.8 billion for the Department of Homeland Security, an increase of $1.4 billion from the FY2005 level. In a significant victory for high-risk/high-threat states — such as California — the bill appears to give the Department of Homeland Security (DHS) the flexibility to allocate the largest part (60%) of states’ formula funding according to risk and terror threat. Whereas DHS will still be required to allocate the first 40% of funds equally among states — providing small states with another windfall of federal dollars — the bill differs from prior years’ bills in that it does not require the rest of the funds be allocated based solely on population.

            In fiscal years 2003-2005, the 60 percent of "basic formula" funding that remained (after a 0.75% base minimum was skimmed off equally for each state) has been allocated solely based on population instead be allocated according to risk factors. [Note: Relying on preliminary information from news sources, last week’s Bulletin incorrectly stated that DHS would be required to allocate the remaining 60% of funds based on risk and threat. In reality, according to the text of the legislation and the conference report, DHS will be permitted to do so. However, numerous recent comments by DHS suggest that risk and threat information will likely be used for the allocation.]

            The bill will provide $3.3 billion for grant programs directed toward state and local first responders, including nearly identical amounts from two pots — $1.155 billion for risk- and threat-based grants for urban areas, and $1.135 billion for grants that have historically used a federal funding formula that has been heavily skewed to favor small states over large states (and has provided several-fold more money per capita to numerous small states such as Wyoming, North Dakota and Vermont compared to what it has provided to large states such as California, New York, or Texas).

            The $1.155 billion for "high-density urban areas" includes $765 million for traditional urban area grants, which DHS distributes according to risk and threat information, plus $150 million for rail security, $175 million for port security, and $65 million for other infrastructure protection activities. California has received between 17 and 20 percent of urban area grant funds.

            The formula funding portion includes $550 million for basic formula grants, $400 million for the state and local law enforcement terrorism prevention program (LETPP), and $185 million for Emergency Management Performance Grants (EMPG). California historically receives about 8 percent of funds from these programs, all of which to date have used the USA PATRIOT Act formula with the unusually large 0.75% state base minimum. Also within the first responder funding account is $655 million for firefighter grants, a program that in 2003 provided approximately 4 percent of its funding to California recipients and typically benefits rural fire departments.

            Most of the bill’s funds will be used to provide $19.1 billion for border protection, immigration enforcement, and related activities. Within that amount is $1.8 billion for border security and control and to provide an additional 1,000 agents for the Border Patrol (in addition to 500 new agents funded by the FY 2005 supplemental appropriations bill). It also includes $3.4 billion for Immigration and Customs Enforcement (ICE), in part funding an additional 250 criminal investigators and 100 new immigration agents. Other border/immigration funding items include $41 million for border security technology, $139 million for the Container Security Initiative (helping track and monitor cargo containers), $54.2 million for the Customs-Trade Partnership Against Terrorism (C-TPAT), $21 million for FAST/SENTRI/NEXUS to "maintain security and facilitate travel on our land borders," $2.9 billion for the Coast Guard’s homeland security activities and $933 million for the Coast Guard’s Deepwater program, $135 million for transportation and removal of illegal immigrants, and $5 million to train State and local officers to enforce immigration laws. (Elsewhere, the bill provides $2.6 billion for traditional Coast Guard operating activities, including maritime safety, drug interdiction, and fisheries, environmental, and humanitarian missions.) In addition, the bill requires that DHS develop and submit "a comprehensive immigration enforcement strategy that reduces the number of undocumented aliens by 10 percent per year" and requires DHS and ICE to develop "a national detention plan for undocumented aliens."

            The bill provides $6.3 billion for the Transportation Security Administration (TSA), including $2.5 billion for passenger and baggage screeners, $443 for in-line explosive detection systems, $1 billion for aviation direction and enforcement, and $686 million for air marshals. It also provides $1.9 billion for citizenship and immigration services (including $1.7 billion in fee-funded activities). Within $1.5 billion for homeland-related science and technology activities are the following: $538 million to develop radiological, nuclear, chemical, biological, and high explosives countermeasures; $110 million for research, development, and testing of antimissile devices for commercial aircraft; $20 million for container security research; and $63 million for university-based centers of excellence and fellowships.

            Although by their nature, any discretionary funding allocation cannot be pinpointed, the change is likely to yield additional funding for California. The state currently receives 8 percent of state formula funds, a proportion that could increase to a 9, 10, 11 or 12 percent share — yielding tens of millions of additional dollars for state and local first responders in California. In practice, homeland security formula funds have come from two pots — 40% is distributed equally to each state, and 60% is distributed via other means (to date, according to state population only). As such, for 2003-2005, California received about 8 percent of total formula funding. The state received 0.8 percent from the one-size-fits-all minimum guarantee portion (or 40% of the pot of money multiplied by the 2% share that every state received) plus 7.2 percent from the population-based portion (or 60% of the pot of money multiplied by the state’s 12% share of the U.S. population).

            Whereas the 2006 conference report’s formula would give California the same 0.8 percent share (40% x 2%) of the "minimum" pot, the state will likely receive a larger share of the remaining funds, if DHS elects to distribute remaining funds in whole or in part according to a federal determination of each state’s risk of terror attack. Thus, supposing the state were to receive between 15 and 20 percent of the "above-minimum" pot of funds, for example, California’s share of total formula funds could increase to between 9.8 percent (0.8%, plus 15% x 60%) and 12.8 percent (0.8%, plus 20% x 60%).

            Much will also depend on which programs are subjected to the new approach — the bill includes $550 million for basic grants, $400 million for LETPP, and $185 million for EMPG. For example, a hypothetical "threat share" of 17% for the state would yield an 11% formula share. Applied to just $550 million (basic grants only), the state would receive an additional $16.5 million. Applied to $950 million (the basic grant and the LETPP), that additional amount would total approximately $28.5 million for the year. And applied to all $1.1 billion that now depend on the formula, California’s share of funds would grow by $34 million.

            For additional information regarding homeland security grants and the share received by California and other states, see "Federal Formula Grants and California: Homeland Security" — part of a joint publication series prepared by the Public Policy Institute of California (PPIC) and the California Institute, at http://www.ppic.org/main/publication.asp?i=481 .

[Supplementary Information]

   For FY 2006, Congress has provided $3.3 billion for grant programs directed toward state and local first responders, including nearly identical amounts from two pots — $1.155 billion for risk- and threat-based grants for urban areas, and another $1.135 billion for SHSGP, LETPP, and other grants that have historically used a federal funding formula that has been heavily skewed to favor small states over large states (and has provided several-fold more money per capita to numerous small states such as Wyoming, North Dakota and Vermont compared to what it has provided to large states such as California, New York, or Texas).

            The $1.155 billion for “high-density urban areas” includes $765 million for traditional urban area grants, which DHS distributes according to risk and threat information, plus $150 million for rail security, $175 million for port security, and $65 million for other infrastructure protection activities. California has received between 17 and 20 percent of urban area grant funds.

            The $1.155 billion in formula funding includes $550 million for basic formula grants, $400 million for the state and local law enforcement terrorism prevention program (LETPP), and $185 million for Emergency Management Performance Grants (EMPG). California historically receives about 8 percent of funds from these programs, all of which to date have used the USA PATRIOT Act formula with the unusually large 0.75% state base minimum.

            The exact fund allocation is as yet unclear, in large part because the allocation has been changed from a relatively certain formula approach to a less certain discretionary approach. Although by their nature, any discretionary funding allocation cannot be pinpointed, the change is nevertheless likely to yield additional funding for California. The state currently receives 8 percent of state formula funds. Under the new scheme, that proportion may increase to a 10, 11, 12., or 13 percent share — yielding tens of millions of additional dollars for state and local first responders in California. In practice, past homeland security formula funds have come from two pots — 40% is distributed equally to each state, and 60% is distributed via other means (to date, according to state population only).

            As noted, for 2003-2005, California received about 8 percent of total formula funding. The state received 0.8 percent from the one-size-fits-all minimum guarantee portion (or 40% of the pot of money multiplied by the 2% share that every state received) plus 7.2 percent from the population-based portion (or 60% of the pot of money multiplied by the state’s 12% share of the U.S. population).

            Whereas the 2006 conference report’s formula would give California the same 0.8 percent share (40% x 2%) of the “minimum” pot, the state will likely receive a larger share of the remaining funds, as DHS has elected to distribute remaining funds in whole or in part according to a federal determination of each state’s risk of terror attack. Thus, supposing the state were to receive between 15 and 20 percent of the “above-minimum” pot of funds, for example, California’s share of total formula funds could increase to between 9.8 percent (0.8%, plus 15% x 60%) and 12.8 percent (0.8%, plus 20% x 60%).

            Assuming a hypothetical “threat share” of 17% for the state would yield an 11% share of total federal formula funding. Applied to $950 million for SHSGP and LETPP, that additional amount would total approximately $28.5 million in additional funding for the year. To reiterate, however, DHS has not announced exactly how it assesses risk or how the grant dollars will be distributed geographically, and it may differ considerably from these past practices.

            [DHS appears at two junctures to imply that a “base allocation” will also be applied to the UASI program, which has never been subject to such a minimum in past years. It is hoped that this represents isolated errors in the document, since that statement is contradicted elsewhere in the document and would alter past policy, but it is cause for some concern as it would dilute funding for high-risk urban areas, some of which exist in above-average concentrations in California.]

            A 200- page pdf version of the DHS documentation is available on the Department’s website and may be viewed at http://www.ojp.usdoj.gov/odp/docs/fy2006hsgp.pdf .

            For additional information regarding homeland security grants and the share received by California and other states, see “Federal Formula Grants and California: Homeland Security” — part of a joint publication series prepared by the Public Policy Institute of California (PPIC) and the California Institute, at http://www.ppic.org/main/publication.asp?i=481 .

[Supplementary Information]

            On December 2, 2005, the Department of Homeland Security (DHS) issued guidance to state and local governments for applying for a variety of homeland security grant funding sources. California stands to benefit significantly from a process recently set in motion by Congressional appropriators. With one small change in the FY 2006 homeland security appropriations bill, Congress gave DHS the option of distributing a portion of grant funding based on risk and threat, a change from past years when the department was required to use only population statistics. Funds in question are under the Homeland Security Grant Program (HSGP), which incorporates several major grant programs including the State Homeland Security Grant Program (SHSGP), the Law Enforcement Terrorism Prevention Program (LETPP), and the Urban Area Security Initiative (UASI).

            In its December program guidance document, DHS appears to have accepted Congress’s offer to distribute some funding based on risk and threat. The document states that “the Department of Homeland Security is adopting in FY 2006 a risk- and need-based approach to allocating funding for certain programs within HSGP. The aim is to allocate and apply these resources to generate the highest return on investment and, as a result, strengthen national preparedness in the most effective and efficient manner.” Later, it specifically states, “DHS has elected to provide a base allocation to States under SHSP and LETPP. The remainder of those funds will be allocated based on risk and need. Under UASI, all funding will be allocated based on risk and need..”

            As such, whereas prior years’ SHSP and LETPP funding was distributed in a manner that yielded just 8 percent of funds for California, the state is likely to receive considerably more funding for FY 2006. (The guidance did not announce DHS allocation of funding among states.)

            The two programs will continue to give an unusually large 0.75 percent base allocation to every state regardless of size, thereby committing 40 percent of total security funding. But unlike in fiscal years 2003 through 2005 — when the remaining the 60 percent of SHSGP and LETPP funding that remained after the base minimum was allocated solely based on population — the remaining 60 percent of funds in 2006 will instead be allocated according to risk factors.

            DHS states that these risk factors will include three components: (1) consequences of a specified attack to a particular asset, (2) the vulnerability of that asset to that particular threat, and (3) the threat to that asset. In addition, DHS indicates that it will assess threats to these assets relative to the asset itself in a strategic context, as well as relative to its geographic location. DHS states, “(1) Asset-based risk utilizes threat values derived from Intelligence Community assessments of the intent and capability of adversaries to accomplish a set of baseline attack modes. These threats and attack types are mapped against specific infrastructure types (e.g., bridges, dams, and chemical plants). (2) Geographically-based risk takes into account values that are based on the inherent attributes of the geographical candidate (i.e., State or Urban Area). This analysis takes into account such factors as international borders, terrorism-related reporting and investigations, and population density.” Need factors will also be addressed and considered, according to the documentation.

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