How We Got Homeland Security Wrong

By Amanda Ripley/Cheyenne

When researcher Karen Clark developed the first probability-based model for measuring the threat of natural disasters in the U.S. in 1987, almost no one cared. Clark, then 30, started her own company in Boston and used tens of thousands of data points--from the wind speeds of hurricanes to the lengths of fault lines--to help insurance firms estimate how often a disaster might strike and how much harm it might do. Then, in 1992, Hurricane Andrew struck, wreaking more havoc than anyone--except Clark and her small team at AIR Worldwide Corp.--had ever imagined possible. As the toll climbed past $15 billion, AIR's phones began ringing.

Today probabilistic modeling technology is so well accepted that after the attacks of Sept. 11, 2001, AIR's clients immediately called for a new model that would capture the risks of terrorism. The model, completed in 2002, assesses the likelihood and cost, in human life and dollars, of different kinds of attacks in every part of the country. It's not perfect, but it's smart. "The risk of terrorism is everywhere," says Clark. "The question is, How much risk?" This time the insurance industry quickly accepted modeling as the basis for figuring out how much terrorism coverage should cost.

International terrorism, as most experts will tell you, is not as unpredictable as it feels. Terrorists follow patterns. And while we can't read the minds of zealots, we can get a good idea of what kind of damage they could do in any given location. We can estimate the cost of an attack on a port in Los Angeles vs. an attack on a port in Prince William Sound. We can calculate where a nuclear blast of a given force would kill 500,000 people as opposed to 50,000. These are the logical estimates that insurers and investment banks are seeking as they try to quantify the risk they face.

But while all this strategic thinking is going on in the private sector, the government has responded to terrorism in a less rational way. Since the Sept. 11 attacks, about $13.1 billion has surged into state coffers from the Federal Government--sorely needed money that has gone for police, fire and emergency services to help finance equipment and training to prevent and respond to terrorist attacks. That is a 990% increase over the $1.2 billion spent by the Federal Government for similar programs in the preceding three years. But the vast majority of the $13.1 billion was distributed with no regard for the threats, vulnerabilities and potential consequences faced by each region. Of the top 10 states and districts receiving the most money per capita last year, only the District of Columbia also appeared on a list of the top 10 most at-risk places, as calculated by AIR for TIME. In fact, funding appears to be almost inversely proportional to risk. If all the federal homeland-security grants from last year are added together, Wyoming received $61 a person while California got just $14, according to data gathered at TIME's request by the Public Policy Institute of California, an independent, nonprofit research organization. Alaska received an impressive $58 a resident, while New York got less than $25. On and on goes the upside-down math of the new homeland-security funding.

How all this happened--and the bitter battle to rationalize the system--shows how far America has yet to go in establishing something called homeland security. With no clear direction from the feds, state officials have been engaged in a perverse competition for antiterrorism dollars. The Bush Administration recently proposed a far more risk-based approach for 2005 funding, but rural-state Senators are balking now that they have had three years to get accustomed to their cash. In some ways, it is a familiar story: of state officials understandably guarding their piece of the pie, of rural localities getting disproportionate help from the government. But this money is not for roads; it is the first demonstration of how America will protect its citizens in a new kind of war. Bogged down in emotion and opportunism, the debate is leading to dangerous gaps in the preparedness of our most vulnerable communities. Says Stephen E. Flynn, a former U.S. Coast Guard commander and director of a homeland-security task force chaired by Gary Hart and Warren Rudman: "At the end of the day, blowing off New York and L.A. so that you can make sure Wyoming is safe just makes no sense."

--HOW DID WE GET HERE?

Why didn't risk figure into the formula written after 9/11 to bolster homeland security? In facing al-Qaeda, we knew we were dealing with an organization that sought mass casualties and headlines. In the confused days after 9/11, when Capitol Hill offices were closed after several were contaminated by letters containing anthrax, a small group of House and Senate leaders got together with Bush Administration staff members in a corner of the Capitol to write the homeland-security funding portion of the USA Patriot Act--a massive and sweeping bill that was propelled into law just six weeks after Sept. 11. Under the direction of Democratic Senator Patrick Leahy of Vermont, then chairman of the Senate Judiciary Committee, they decided to adopt a formula that had been used in years past for distributing terrorism-preparedness funds, a formula that had never been written into law before and that was designed for a sum of money that was incomparably smaller. This unusual formula mandated that each state receive a minimum of three-quarters of 1% of the total pot of money, with smaller shares going to territories like Puerto Rico. That meant that 40% of the funds had to be divided up equally among the states, regardless of size or population.

There wasn't much debate about the decision, says a Democratic Senate aide who was involved in the negotiation. "Frankly, it wasn't as high a priority as FBI wiretaps and some of the other things being debated." The formula first appeared in the Patriot Act bill on Oct. 23. One day later, it was passed by the House. "Nobody even noticed it until five months later," remembers a House aide.

But Congress alone isn't to blame for the skewed funding. The Executive Branch was left with exceptional leeway to spend the remaining 60% of the funds any which way--including according to risk. But first in 2002 and then again in 2003 and 2004, under the newly created Department of Homeland Security, the Executive Branch just split the money according to each state's population.

--THE LITTLE VS. THE BIG

Small-state politicians argue that every state, no matter how underpopulated, needs a boost of money to achieve a minimal level of security after Sept. 11. "Whether it's a state of half a million or 4 million, you've got to do certain basic things," Senator Leahy told Secretary of Homeland Security Tom Ridge during a February hearing. Says Doug Friez, the top homeland-security official in North Dakota (pop. 642,200), which received $52 a person in federal funds last year, the fourth highest per-capita allocation by state: "We realize North Dakota may not be first on Osama bin Laden's list. But we have some significant infrastructure, we have big buildings you can put a lot of people in at one time, we have the border. We have all the things that can make a terrorist stay." New Hampshire, the No. 9 state recipient of funds per capita, is not easily outdone. "Yes, New York City is more target rich," says Bruce Cheney, director of New Hampshire's bureau of emergency management. "But there's been a lot of added security there. If you're a terrorist, you may say, Why waste your time in New York City when you can make a hell of a mess in Maryland or Delaware or, God forbid, Portsmouth, New Hampshire?" Says Flynn: "Everybody's become Tom Clancy."

It would be ideal if every American town had a basic level of readiness, but the total pot of money is too small, says Tim Ransdell. He authored one of the few comprehensive assessments of homeland-security money on behalf of the Public Policy Institute of California. "Wyoming and South Dakota are important states, but it's a bit counterintuitive to say an individual in those states is manyfold more important than someone living in a state that has a border with a foreign nation, some of the nation's icons and almost half of the nation's containerized cargo." Says Al O'Leary of the New York City Patrolmen's Benevolent Association: "It goes against every fundamental precept of fighting crime. If you're having a robbery pattern in a particular community, you put detectives there. It's actually a no-brainer, but there's apparently no brain in Washington, D.C."

--WYOMING: A CASE STUDY

To its credit, Wyoming, the least populous state in the U.S., does not feel like an ideal place for a terrorist attack. The 493,800 people who live here have a well-deserved affection for the state's yawning prairie land, framed by mountains and speckled with elk, antelope and mule deer. Wyoming's biggest city is Cheyenne, the capital, which is still not serviced by jet liners. "It's very hard to hide in Wyoming," says Joe Moore, head of Wyoming's office of homeland security, on my first morning in town. "By the end of the day, everyone will know you're here."

Like most rural states, Wyoming does not have a lot of money from property taxes to outfit its police, fire and emergency-services personnel. On top of that, the legislature has never been too generous. Until recently, it wasn't unusual for a fire station to hold a bake sale to raise money. Last summer, after a vintage World War II--era German bomber crashed into a building in Cheyenne, fire, ambulance and airport personnel could not talk to one another over their radios because they use different equipment. "We eventually ended up sending runners--like the Greeks," says Brian Grimm, communications officer for the state office of homeland security.

Now that Wyoming is the nation's No. 1 state recipient of homeland-security money per capita, Cheyenne has access to a mobile radio system that allows different agencies to talk to one another, thanks to $52,000 in federal money. Federal money has also brought Wyoming four command vehicles; enough protective haz-mat suits for every police officer, sheriff's deputy and coroner in the state; and a robot named Miss Daisy that can help dismantle bombs and dispose of toxic chemicals. All these items will more than likely save lives. Hazmat suits can be used for highway oil spills and police raids of crystal-meth labs. As the fire fighters will tell you, they should have had this equipment years ago. Mark Young, chief of the Casper fire department, says of federal authorities, "They've done us all a favor in this state. We're not gonna waste their money."

But a strange thing has happened since Sept. 11. Moore and some of his counterparts in other rural and small states have become convinced that their turf is just as threatened as Washington, New York and Chicago. One recent morning, Moore rattled off his doomsday scenarios: "We have two major interstate highways, and a significant proportion of the traffic is hazardous materials. We have two major railroads. Also, Wyoming has major mining, major electrical generating plants and coal-bed methane. Any one of those becomes a vulnerability for a terrorist." A former FBI agent, Moore works in an office decorated with a sketch of a longhorn sheep and a picture of the burning Twin Towers with the phrase CONSTANT VIGILANCE. When I ask him how he would prioritize limited federal money, he declines to answer. "We don't have crystal balls. We just believe that we're as important as anyone else."

Over and over again, when I ask Wyoming officials about relative risk, they talk about relative worth. "Our citizens deserve the same kind of protection that they're afforded in other places in the country," says Lori Emmert, chief of police in Douglas (pop. 5,288), which has just received a new $50,000 silver RV that serves as an emergency-operations command center, paid for with federal dollars. When I ask a group of 22 fire fighters in Casper whether they feel insulted by suggestions that they should get less homeland-security money, they all nod in agreement. "No one can say Casper can't be a terrorist target," says fire fighter Roy Buck. Taking the point further, Peter Beering, terrorism-preparedness chief in Indianapolis, Ind., writes in First to Arrive, a Harvard collection of essays on emergency preparedness, "In an era of satellite television ... attacking a rural target may actually instill more fear by delivering the message that no one is safe."

While that is a valid point, certain kinds of attacks would kill far fewer people in Casper than they would in Boston, owing to population density. And as it stands, the funding system is vulnerable to opportunism. While money for homeland security has grown, regular state and federal funding for police and fire operations continues to be cut as both state legislatures and the Bush Administration try to control growing budget deficits. In order to get the homeland-security money, states and localities must frame their needs in terms of terrorism. Wyoming Governor Dave Freudenthal defends his state's allotment but admits there is an incentive to see terrorism all around. "If you're trying to pick up an ambulance, you may know that ambulance will be used for natural disasters, but the paperwork will have to reflect terrorism. That's the problem. Money distorts objectivity."

--WHERE THE PINCH IS FELT

New York City has been the target of six separate plots by Islamist terrorists in the past decade, police commissioner Ray Kelly told Congress at a hearing last fall. Yet budget cutbacks have left 5,000 fewer police in the city than there were in 1999. And Kelly has pulled 1,000 of the remaining cops off normal duty to work on terrorism prevention. "We're doing more with less in many ways. There's an opportunity cost," Kelly says. "People who were doing homicide are now doing terrorism." New York City estimates its counter-terrorism needs at $900 million, he says. To date, it has been awarded about $206 million. "We are grateful for the help, but it does not come anywhere near the needs that we have," Kelly testified. "Far and away, the people and city of New York are bearing the cost of defending the homeland in New York."

The same can be said of Los Angeles. Since 9/11, California has spent more than $185 million in state funds on homeland security. Still, the L.A. County sheriff's department, which protects 10 million people, recently announced it may have to lay off 1,300 officers under Governor Arnold Schwarzenegger's proposed budget plan.

Meanwhile, Wyoming is in a position to pay a greater share of the cost of protecting itself, yet refuses to do so. Thanks to high energy prices, Wyoming's plentiful oil and coal resources have helped produce a rare $1.2 billion state surplus, the largest in the nation as a percentage of budget, according to the National Conference of State Legislatures. Recently, the state's office of homeland security asked the Wyoming legislature for $532,000 over and above the $105,000 it already pays for Wyoming security chief Moore's salary. But the Governor and the office of homeland security removed the request before the measure came up for a vote because, says Governor Freudenthal, "they were going to kill the bill" otherwise. Since Sept. 11, California has spent roughly $5 a person of its own money on homeland security; Wyoming has spent about $1.

--CAN THIS BE FIXED?

In early 2003, Congress announced a plan that sounded as if it might rectify the distortions in federal outlays--a new $100 million grant for "high threat" urban areas only. In April, Secretary Ridge said seven cities had made the "high threat" list because of population density, the presence of important infrastructure and credible threats--which is to say, because of risk. The roster of cities--New York, Washington, Los Angeles, Seattle, Chicago, San Francisco and Houston--matched up perfectly with AIR's list of most at-risk cities. Democratic Congressman Anthony Weiner of New York, which received 25% of the new grant, says, "I was thinking, finally it seems we have a program based on merit, and clearly not based on politics--because a lot of these cities are not exactly Republican bastions."

Soon, however, the list of qualifying cities started mysteriously growing. Ridge's office and Congress had received calls from irate city officials who had been left out. In May the roster grew to 30 cities. But the pool of money also expanded by $700 million, so it didn't seem like a problem. "We're thinking, O.K., we're getting 18% of the pot. That's reasonable," remembers an aide for a New York member of Congress. Then, for 2004 money, the Department of Homeland Security announced an even longer list of 50 cities, including Columbus, Ohio, and Fresno, Calif. And the dollars shrank to $675 million. At that point, Weiner says, he lost heart. "We found a solution, and we're even screwing that up. We have some cities on there that don't even have minor-league baseball teams," he says. "Homeland security is just as much a pork barrel as every other program in Congress." New York City now receives 7% of the money.

Some Democrats from high-population states claim the funding scheme reflects the Bush Administration's political interests. "The political reality is that they don't have a constituency in big cities," says New York Senator Hillary Clinton. "They have been very resistant to doing the kind of national planning that would rationalize [the spending]. Nobody can deny we've made progress. But we've failed to take seriously the challenge of homeland security--because the Administration does not want to assume those responsibilities and does not want to spend the resources."

Homeland Security officials insist their approach makes sense, and point out that it has become more risk-based. "We're in the risk-management business here. We know the potential for a mass-casualty attack is not evenly divided," says Josh Filler, the department's director for state and local coordination. "We still believe everybody needs that baseline level of funding, but beyond that, we want to focus." Instead of implementing a risk-based model itself for the 60% of its budget that is discretionary, however, the department is waiting for Congress to do it. Explains a senior department official: "We wanted to engage with Congress before we messed around with that." Says an aide to a House Democrat: "Essentially, they just punted. It was outrageous."

The House Homeland Security Committee last week approved a bill to make the funding formula smarter. The measure, sponsored by chairman Christopher Cox, a Republican from California, would eliminate the state minimum from most grants and distribute much of the money according to risk. "It can't be true that fighting terror is entirely in the eye of the beholder. There has to be some discipline," he says. In its 2005 budget, the White House has also requested that more money be shifted over to the grants for "high risk" cities.

But the Senate is not going to make reform easy. On Feb. 10, Leahy, a member of the powerful Homeland Security Appropriations Subcommittee and whose home state, Vermont, gets $54 per capita in federal funds, curtly reminded Ridge of the leverage that small states wield. "I have to say, I was really disappointed that the President's proposed budget ... drops the all-state minimum formula," he said. "That would affect all but, I think, one or two in this subcommittee. So it may be of more than passing interest." He then added, "I believe ... the Administration wants to shortchange rural states." Behind closed doors, the opposition is even more formidable. "World War III has broken out at meetings if we even talk about changing the formula," says a staff member in the Senate. Another Senate aide says the Cox bill is "going nowhere."

On the one-year anniversary this month of the creation of the Department of Homeland Security, Ridge addressed a Washington ballroom full of county executives. "The attacks of 9/11 required a whole new philosophy of how we secure the country," he said. So far, though, pork-barrel tradition is winning out in Washington. Change will require more people like Senator Judd Gregg, a Republican from New Hampshire, who has spoken out in favor of risk-based funding, even though it would almost certainly mean less money for his own state. "We know certain facts about the enemy. There are certain logical places where you're going to use weapons of mass destruction," he says, as if it's obvious. "This is a question of national security. Politics is irrelevant." --With reporting by Mitch Frank/New York

With reporting by Mitch Frank/New York