Improving Efficiency and Reducing Costs in the Department

Report Homeland Security

Improving Efficiency and Reducing Costs in the Department

September 24, 2002 5 min read

Contributors: Rea Hederman and Michael Scardaville

Two vastly different bills before Congress, which seek to establish a new Department of Homeland Security (DHS), will have significantly different five-year costs, according to the Congressional Budget Office (CBO). Implementing President Bush's plan, for example, will cost the American taxpayer about $3.3 billion, while a bill introduced by Senate Governmental Affairs Committee Chairman Joseph Lieberman (D-CT) will cost about $10.7 billion. Both bills include measures of merit, such as the National Bio-Weapons Defense Analysis Center, and measures that may limit the overall effectiveness of the federal effort. But the President's bill offers the nation more flexibility and efficiency in improving homeland security as well as savings of at least $7 billion through 2007, compared to the Senate bill.

On June 24, President George W. Bush offered Congress a structure for the new department that focuses on consolidating existing federal functions to improve the efficiency and effectiveness of federal programs.2 He also notified Congress that he intended to pay for this massive reorganization of the government with funds he included in his fiscal year 2003 budget request.3 As the experience of private-sector mergers and acquisitions shows, the President's approach should increase the effectiveness of federal homeland security programs and also reduce overhead costs associated with bureaucracy. The House passed a modified version of the President's plan (H.R. 5005) on July 26.

That same day, however, the Senate Governmental Affairs Committee passed out a bill (S. 2452) that takes a different, more costly approach. The bill's language would prevent the President or Secretary of Homeland Security from consolidating any programs or functions that are transferred to the new department. S. 2452 also adds numerous new programs to the department, including some that are not directly related to and would not directly improve homeland security, such as repairing Amtrak's cars and tunnels.

The differences between these two approaches will dramatically affect the total cost of implementing and operating the new department. Overall, the Congressional Budget Office estimates that, between fiscal years 2003 and 2007, implementing S. 2452 will cost approximately $10.7 billion, about $7 billion more than the President's proposal ($3.3 billion). In addition, the Senate bill includes a prohibition on consolidating redundant federal roles, which is likely to increase overhead costs significantly while reducing the department's overall effectiveness in the foreseeable future.

Congress should provide a solid foundation for the new department that would not only improve security but also would reduce the total cost of the homeland security effort. Specifically, Congress should allow the Secretary of DHS to consolidate redundant and overlapping federal agencies and programs that are transferred to the new department, and it should refrain from adding numerous new programs, particularly any that clearly will not improve security against terrorism. S. 2452 fails to do either and, in its current version, will cost billions of dollars more over the next five years than would the President's plan.

Two different Approaches to Creating a DHS

On the same day that the Senate's Governmental Affairs Committee approved the costly S. 2452, the U.S. House of Representatives passed the National Homeland Security Act of 2002 (H.R. 5005), which was based on and still closely mirrors the President's initial proposal. The approach seeks to reduce redundancy and improve efficiency by consolidating many of the homeland security functions that are currently spread throughout the federal government. Among the many changes made to the bill during the legislative process, however, are detrimental provisions that would prevent the consolidation of the Customs Service and the United States Coast Guard--two of the most important agencies for border security--into the proposed DHS Directorate of Border and Transportation Security.

S. 2452, the National Homeland Security and Combating Terrorism Act introduced by Senator Lieberman that is currently being debated by the full Senate as a substitute to H.R. 5005, offers a radically different structure for the new DHS. It includes billions of dollars of new spending on many additional programs that are either unnecessary or unrelated to homeland security, and it severely limits the proposed Secretary of Homeland Security's authority to eliminate fragmentation among the programs transferred to the new department.

Such differences in the two approaches are significant, and will have a massive effect on the costs of both reorganizing the federal government for homeland security and running the new department in the foreseeable future.

CBO's Cost Estimates

This summer, the Congressional Budget Office reviewed both the President's proposed legislation (introduced as H.R. 50054) and the bill passed by the Senate Government Affairs Committee (S. 24525). CBO's scoring of S. 2452 shows an implementation cost between fiscal years 2003 and 2007 of almost $10.7 billion, compared with a cost of about $3.3 billion to implement the President's plan.

Both estimates are of spending that is beyond what CBO projects the federal government would have spent on the current federal activities transferred to the new department. The baseline estimates for these other activities were $31 billion for the President's proposal, and $33 billion for the department under S. 2452. CBO's estimates do not include additional funds designed to improve the effectiveness of the existing programs, nor does the CBO estimate account for potential savings due to efficiency gains through the President's proposal.

Most of the additional cost of S. 2452 would come from the new programs and policies that the Senate Government Affairs Committee wants to add to the President's request. Between 2003 and 2007, CBO estimates that these new programs would increase spending by about $9.6 billion. (See Table 1.) Of this amount, $1.9 billion would be for the Directorate for Science and Technology, $1.1 billion for new refugee and asylum adjudication and ombudsman programs in the Directorate for Immigration Affairs, and $1.2 billion for grants to Amtrak (mostly for programs unrelated to security, with other programmatic costs being distributed throughout the department).

Most of CBO's estimated $3.3 billion in additional spending over that period for new programs in the President's proposal would be used to establish a National Bio-Weapons Defense Analysis Center, also an element of S. 2452.


Rea Hederman

Director, Center for Data Analysis and Lazof Family Fellow

Michael Scardaville

Policy Analyst