The Homeland Security Budget Request for FY 2005: Assessments and Proposals

A Brief History of Homeland Security Spending

Increased funding for homeland security began2 before the September 11, 2001, attacks on New3 York and Washington. Between FY 1995 and FY 2001, the federal government increased homeland security spending in the regular annual appropriations bills from $9 billion to $16 billion, an increase of 60 percent.4 In many areas, however, growth was extremely modest. Expenditures for weapons of mass destruction (WMD) preparedness from 1995 to 2000 grew from effectively zero to $1.5 billion.5 While increased spending reflected a tacit recognition of the growing danger of transnational terrorism, it was woefully inadequate to creating a national homeland security system capable of effectively integrating federal, state, and local government assets as well as private-sector assets.6

In contrast, federal spending on homeland security grew dramatically after 9/11. Congress approved $64 billion in emergency funding, including $20 billion for FY 2001 and $44 billion (in two separate supplemental appropriations) in FY 2002. Perhaps one-third of the $64 billion was directed to homeland security programs and activities. The Administration spent $42.4 billion on homeland security in FY 2003.7 Altogether, between FY 2001 and FY 2003, funding for homeland security was increased by some 240 percent.8

In the FY 2004 budget, overall spending on homeland security actually declined slightly in real terms, largely because of a large supplemental appropriation in FY 2003 (over $6 billion), which included many one-time costs such as added security measures in response to national homeland security advisory warnings and Department of Defense (DOD) force protection enhancements.9

Stabilizing funding for two years was prudent. While enormous security challenges remain, allowing the many agencies involved some time to absorb the large increases since 9/11 made sense, particularly since this period saw the creation of the DHS and consolidation of a workforce of over 180,000 personnel spread around the country and the world into under its authority. The FY 2004 budget also marked the first complete congressional appropriations cycle for the DHS.

Looking forward to the FY 2005 budget and beyond, there was never any question that increased funding would be needed once a firm foundation for the nation's homeland security architecture had been established.10 The face of 21st century global terrorism leaves little room for complacency.

Building a Federal Homeland Security Effort

An important hallmark of the 2005 budget proposal is its recognition that homeland security responsibilities cut across all federal departments. Even after the consolidation of over two dozen agencies, offices, and activities, many federal entities outside the DHS retain important homeland security functions.

The DHS budget ($40.1 billion) accounts for 57 percent of all domestic security expenditures.11 In addition, in the FY 2005 budget proposal, total non-DHS funding grew at a slightly higher rate than the proposed budget for the DHS. The homeland security budgets of the Departments of Defense ($8 billion), Health and Human Services ($4.3 billion), Energy ($1.5 billion), Justice ($2.6 billion), and State ($1 billion) along with DHS account for all but 6 percent of proposed homeland security funding.

With the exception of the Department of Defense, all agencies with major homeland security responsibilities would receive increased funding in FY 2005. In the DOD, however, real spending (in inflation-adjusted dollars) from FY 2003 to FY 2005 would decline by 9 percent.12

The lack of significant new DOD homeland security initiatives is difficult to understand. The department has a major role to play in developing an effective national security system, particularly in improving U.S. maritime defenses, securing vital defense critical infrastructure, contributing new technologies, and preparing to respond to catastrophic terrorist attacks.13

Congress should:

• Examine the need for more resources for the U.S. Northern Command (the military headquarters responsible for protecting the homeland).
• Increase appropriations to expand the National Guard's capacity to respond to catastrophic terrorist attacks.
• Require initiatives for enhancing the role of U.S. naval forces in protecting U.S. territorial waters from terrorist attack and better integrating the service's activities and acquisition programs with the U.S. Coast Guard.
• Establish programs to better leverage military technologies for homeland security missions.

FY 2005 Budget Priorities

However, increased spending on homeland security alone is not the measure of success. Additional resources are appropriate only if they can be invested efficiently and effectively and contribute substantively to the strategic goals of building a national homeland security system and better preparing the nation to respond to catastrophic terrorist attacks. By these measures, the FY 2005 budget proposal appears largely on the mark.

The following analysis looks at funding in each of the critical mission areas established by the national strategy and proposes principles to guide the consideration of investments in each category. In light of these principles, several areas of concern are highlighted.

Intelligence and Early Warning . This critical mission area includes activities related to detecting terrorists and disseminating threat information and warning. The key principle that should guide investments is the development of programs that promote intelligence sharing across the public and private sectors. Effective intelligence sharing is a prerequisite for exploiting the full potential of national capabilities to respond to potential terrorist threats.

For FY 2005, the Administration proposes to spend $500 million on intelligence and early warning, an increase of 73 percent.14 While the lion's share of this funding (61 percent) is for the DHS, significant spending falls outside the department's purview. (See Table 2.) This is appropriate given that intelligence and early warning must be a national activity, not a task performed by the DHS in isolation.

However, greater consolidation of budget authority might be justified in regard to the newly established Terrorist Threat Integration Center (TTIC) and Terrorist Screening Center (TSC). In the Administration's current proposal, the TTIC, overseen by the Director of Central Intelligence, would be staffed by an interagency group that would gather, assess, and disseminate all terrorist-related information to federal agencies. The TSC, an interagency staff overseen by the FBI director, would be responsible for consolidating, deconflicting, and dispensing terrorist watch list information. In both cases, the DHS would play only a subordinate role.15

Establishing critical programs such as the TTIC and the TSC outside the oversight of the DHS is problematic. The current arrangement appears to conflict with the intent of the Homeland Security Act of 200216 and raises concerns over whether such an approach will optimize intelligence sharing. It is deeply troubling that the DHS, as the primary consumer of intelligence for providing domestic security, does not have primary control over the mechanisms for fusing and disbursing information.

The current arrangement leaves the DHS as little more than just another intelligence end user, competing with other members of the national security community to ensure that its priority requirements are met. For the near term, this concern might be ameliorated somewhat by placing all appropriations for the TTIC and the TSC under the purview of the DHS, giving the DHS secretary substantial responsibility for determining the long-term development of these capabilities. In addition, the DHS secretary should be given oversight responsibilities for both the TTIC and the TSC.

The DHS Homeland Security Advisory System (HSAS) is another critical program that affects the sharing of intelligence and warning information across the public and private sectors. The HSAS employs a series of color codes to designate various levels of national preparedness in anticipation of a terrorist attack.

The $10 million requested for FY 2005 is not an issue of contention. On the other hand, implementation of the system could have a significant impact on future requirements for supplemental funding. Increased security resulting from changing the alert level requires an estimated $1 billion per week. Of significant concern is that the system does not appear to work well in alerting state and local governments, the private sector, and the general public.17 Funding should be contingent on undertaking significant revisions.

An effective alert system and better means of coordinating and disseminating critical intelligence information are the cornerstones of creating an effective intelligence and early warning system. It is critical to get these programs right.

Congress should:

• Provide all appropriations for the TTIC and the TSC through the DHS.
• Appropriate additional funding to overhaul the HSAS and make funding contingent on adopting major reforms to overhaul the program.

Border and Transportation Security. Protecting border and transportation systems includes managing the border and ports of entry, ensuring aviation and maritime security, and developing guidelines and programs for protecting national transportation systems. The key principle guiding federal investments in this area should be ensuring the adoption of a layered security system: a combination of effective, mutually supporting initiatives that simultaneously provide useful counterterrorism measures, protect civil liberties, and do not encumber the flow of travel and commerce.

Proposed spending for FY 2005 totals $17 billion. The recommended increases for border and transportation security ($1.7 billion) represent a real increase of approximately 9 percent over the FY 2004 budget.18 The DHS appropriation accounts for 94 percent of the border and transportation security budget, reflecting one of the key objectives of the Homeland Security Act: consolidating responsibility for these functions under a single federal entity. Most of the additional spending (88 percent) is also within the DHS as part of the budgets of the Border and Transportation Security (BTS) Directorate and the U.S. Coast Guard. Passport and visa issuance programs within the Department of State account for most of the remaining additional spending.

While the overall increase is substantial, funding for the DHS role in maritime security is an issue of concern. In particular, the appropriation for the U.S. Coast Guard's Integrated Deepwater acquisition program--a long-term modernization effort to recapitalize the service's fleet of cutters, aircraft, sensors, and command and control--is inadequate.

The Coast Guard's fleet is old, expensive to operate and maintain, and poorly suited for some homeland security missions.19 Deepwater was to be funded at $330 million (in 1998 dollars) in the first year and $530 million (in constant dollars) per year in the following budgets, but no annual budget before FY 2004 matched the required rate of investment. Meanwhile, the Coast Guard's increased operational tempo and expanded mission requirements since 9/11 have been wearing out the fleet faster than anticipated, putting the modernization program even farther behind schedule.

In the Administration's FY 2005 budget, Deepwater would receive $678 million, an increase of $10 million.20 This level of funding is totally inadequate to support rapidly building up an essential component of the nation's homeland security system. Dramatically increasing the budget for Deepwater would not only establish the capabilities needed for a long-term security system sooner, but also garner significant savings (perhaps as much as $4 billion) in lower procurement costs.21 Reducing life-cycle expenses by retiring older and less capable systems would realize additional savings.

While Deepwater funding should be greatly accelerated, Congress should consider taking a "go slow" approach on the United States Visitor and Immigrant Status Indicator Technology (US-VISIT) program. The purpose of US-VISIT is to establish a system that can collect, maintain, and share biometric22 and biographic data on foreign nationals for border and immigration enforcement. The goal of the system is to screen all foreign nationals from non-visa-waiver countries entering and exiting the United States.23

Implementing US-VISIT is an enormous challenge. While the program could become a valuable tool for identifying terrorists or other inadmissible persons, poor implementation could unnecessarily im-pede international travel and compromise individual privacy while failing to function effectively in identifying individuals who pose a security threat. In addition, establishing the program will rely heavily on creating new systems that employ cutting-edge biometric and information technologies. Even if done effectively, establishing and operating the system could eventually cost $10 billion.24 Failure to master the US-VISIT's complex requirements could lead to ballooning costs or poor system performance.

The DHS proposes to fund US-VISIT at $340 million for FY 2005, an increase of $12 million.25 However, substantially increasing the program at this point may not be warranted. Key parameters, such as how biometric data26 would be employed, are not yet established. Until critical system design parameters are addressed, accelerating the rollout of US-VISIT would be imprudent.

Congress should:

• Add sufficient additional resources for Deepwater acquisition to enable the Coast Guard to speed up procurement and save more than $4 billion in procurement costs.
• Refrain from increasing funding for US-VISIT until the program has established an overall enterprise architecture that accounts for controlling costs, protects individual privacy, minimizes impact on international travel, and demonstrates effectiveness as a counterterrorism tool.

Domestic Counterterrorism. This mission area comprises law enforcement efforts--principally by the FBI and U.S. Immigration and Customs Enforcement--to identify, thwart, and prosecute terrorists. The guiding principle for enhancing this critical mission area should be adopting programs that expand the capacity to conduct counterterrorism operations without impinging on civil liberties or detracting from other law enforcement priorities.

The Administration proposes to spend $3.4 billion on domestic counterterrorism in FY 2005, an increase of 10 percent. Appropriately, 97 percent of the proposed appropriations is for the DHS and the Department of Justice.27

One area in which capacity to conduct investigations might be expanded to good effect is in cooperation among federal, state, and local law enforcement agencies in immigration investigations that relate to counterterrorism. Using state and local law enforcement officers to enforce federal immigration laws has long been controversial, and the issue has come under greater scrutiny since 9/11.28

In June 2002, the Immigration and Naturalization Service (INS) and the state of Florida established a pilot program that could serve as a model for enhanced and appropriate cooperation. Under the program, select state and local law enforcement officers were trained to assist in immigration domestic counterterrorism investigations.29 Florida officers had to be members of the state counterterrorism task forces and were permitted to engage in these activities only when they are taking part in a counterterrorism operation supervised by INS officers.

When the DHS assumed the functions of INS, the memorandum of understanding governing the program was renewed. The Florida pilot program represents an ideal model for the limited and appropriate use of state and local support in expanding the investigatory capacity of the DHS.

Congress should:

• Provide sufficient resources to allow the DHS to offer programs based on the Florida model to other states and U.S. territories.
• Appropriate funds for sustainment training and support for state programs.

Protecting Critical Infrastructure and Key Assets. This critical mission area includes national efforts to secure public and private entities.30 Since over 85 percent of the nation's critical infrastructure and key assets are not federally owned, developing programs to ensure responsible, efficient, and cost-effective cooperation between the public and private sectors should be the principle guiding investments in this area.

The Administration has requested $14 billion for critical infrastructure and key asset protection in FY 2005, a real increase in budget authority of approximately 10 percent over the previous fiscal year.31

Funding for this critical mission is appropriately distributed among all federal agencies. The DHS budget accounts for only 18 percent ($2.6 billion) of 2005 funding. All federal agencies have responsibilities in protecting their own infrastructure and coordinating with their counterparts in state and local governments and the private sector.32

The security of U.S. ports is one area requiring particular attention.33 The bulk of U.S. exported or imported goods pass through American ports, making their security vital to the national economy. Port security also has a critical national security dimension.34 Making these challenges particularly pressing is that U.S. ports must comply with new security provisions detailed in the International Maritime Organization's International Shipping and Port Security Standards (ISPS) and the U.S. Maritime Security and Transportation Act of 2002.35

However, in developing a funding strategy to improve port security, the Administration should not become overly "port-centric." Addressing all the critical infrastructure concerns at U.S. ports could well require many billions of dollars.36 On the other hand, the DHS awarded only $245 million in port grants in FY 2003 (albeit the largest amount of any year to date).

This restraint is appropriate. Addressing the considerable vulnerabilities of maritime infrastructure does not necessarily require a dramatic infusion of federal dollars. For example, effective intelligence and early warning, domestic counterterrorism, and border and transportation security programs can help to reduce risks to critical infrastructure by limiting the opportunities for terrorists to reach U.S. ports. In addition, the overwhelming preponderance of maritime infrastructure is in private hands. Initiatives that enable and encourage the private sector to take a more expansive and proactive role should be central to any protection program.

Federal port grants should used sparingly, as a tool to promote appropriate public-private sector solutions. Therefore, despite the looming July 2004 deadline, the Administration was right to limit port grants for FY 2005 to $50 million.37

In addition, the Administration proposes to phase out Operation Safe Commerce in FY 2005. Launched in November 2002, the program was in-tended to use pilot projects in the ports of Seattle-Tacoma, Los Angeles-Long Beach, and New York-New Jersey to test technologies and practices, including cargo tracking, anti-tampering, information protection, and real-time data reporting.38 However, it has shown only limited results, and the research and development effort could be performed better and more efficiently under a development program in the DHS Science and Technology Directorate.

Congress should:

• Limit funding for port security as proposed by the Administration.
• Transfer Safe Commerce initiatives to the DHS Science and Technology Directorate.

Defending Against Catastrophic Threats. This critical mission area includes developing better sensors and procedures to detect smuggled nuclear, radiological, chemical, and biological weapons; improving decontamination and medical responses to such weapons; and harnessing scientific knowledge and tools for counterterrorism efforts. The guiding principle for investments in this mission area must be to focus funding on developing new means to prevent, respond to, and mitigate the unprecedented dangers posed by catastrophic threats.

The Administration proposes to spend $3.4 billion (an increase of 19 percent) on such measures in FY 2005, in addition to $2.5 billion on Project BioShield.39 Appropriately, the DHS ($0.9 billion) and the Department of Health and Human Services ($1.9 billion) account for 82 percent of the homeland security research and development effort.40

While the overall level of science and technology funding appears appropriate, Project BioShield, in which both the DHS and the Department of Health and Human Services (HHS) participate, bears watching. Originally proposed by the Administration in February 2003 as a 10-year, $6 billion program, its goal is to develop new biomedical countermeasures.41 Both the management and resources dedicated to the program are subjects that should be revisited.

The program might benefit from the consolidation of responsibilities in a single department. While the BioShield appropriations are directed through the Federal Emergency Management Agency (FEMA) in the DHS, HHS has far more expertise in managing large-scale medical research programs.42

The scope of resources dedicated to the program is also an issue. For FY 2005, spending is authorized at $2.5 billion. It is unclear, however, whether this funding will produce dramatic results. Major pharmaceutical companies, like Merck and Pfizer, spend more than $6 billion a year to develop only a handful of new drugs. BioShield may not be sufficiently attractive to the private sector to result in significant new developments.43

Congress should:

• Streamline management of the program by placing all appropriations and responsibility for the program in HHS.
• Require that metrics be established to evaluate progress in the program.
• Require alternative strategies for the commercial development of biomedical technologies in case BioShield fails.

Conclusion

Overall, the Administration has proposed a responsible budget for enhancing homeland security. America faces a protracted war against global terrorism and requires a homeland security system that is equal to the task. The Bush Administration has accomplished this goal by funding priorities in line with the national homeland security strategy.

It remains for Congress to take a hard look at the budget, ensuring that new initiatives are properly funded to support the President's program.

James Jay Carafano, Ph.D., is Senior Research Fellow for National Security and Homeland Security in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation. Al Canata assisted in the preparation of this report.