Q. Every time there is a terror alert communities spend millions of dollars for additional security. Who pays these costs? Is the money taken from the budget for public services like police, fire and schools?
It depends. Here’s the background. The Homeland Security Advisory System, established in March 2002, consists of five color-coded threat conditions. Each represents an escalating risk of terrorist attacks. Each level prescribes protective measures for communities. Implementing these measures is mandatory for federal agencies, but compliance is voluntary for all other levels of government and the private sector.
Since the color-coded system was established the national threat level has never been coded green or blue, the two safest levels. It has remained at yellow – elevated alert– except for five times when the administration has raised the national threat level to code orange – high alert. 
On August 1, 2004 the Department of Homeland Security (DHS) raised threat level to orange for a sixth time, but only for the financial sectors in New York City, northern New Jersey and Washington D.C. The rest of the country remains at code yellow.
The U.S. Conference of Mayors estimates that additional spending related to increased threat levels amounts to $70 million per week for city governments alone. The data is imprecise because the costs are borne by many different agencies. The biggest single expense is police overtime. There are 17,000 police departments in the country.
The costs of terrorism alerts are not spread uniformly. Urban states, border-states and those with infrastructure targeted for protection see significant expenses each time the threat level is raised. Los Angeles estimates that it costs the city as much as $2 million per week when the alert level is raised from yellow to orange.
Smaller and more rural cities report fewer added costs. But they still can incur costs that take money from other parts of the budget. The police chief of Portland, Maine estimates that the department pays $5000 in additional overtime in each week of an orange alert. Putnam County, New York (population 84,000) spent $99,038 on the 3-week orange alert in February 2003.
The federal government provides funds intended to offset the costs of increased security. These take the form of block grants sent directly to states, with specific conditions attached to their disbursement. State administrative agencies are required, for example, to distribute 80 percent of federal money to local governments and selected cities within 45 days of receipt. The remaining 20 percent can be used by state government for additional security enhancements.
The conditions attached to homeland security fund disbursement creates the first level of complexity and inefficiency in the system.
Funds can only be used for anti-terrorism expenditures. They cannot be used to offset the costs of daily operations. They cannot be used to purchase new communication radios for daily use, or to purchase new patrol vehicles, or to pay police salaries. To complicate matters further, funds earmarked for preparedness cannot be used to cover orange alert costs while funds for orange alert costs can only be used to pay for overtime, not reassignments. Currently local governments cannot use homeland security funds to offset overtime and other personnel costs incurred in providing protection for specific local events if the national threat level has not been raised.
In fiscal year 2003 the federal government established Operation Liberty Shield, a short term program for domestic protection with a budget of $2.23 billion. In fiscal year 2004, $2.2 billion was appropriated by Congress and allocated among the states for state and local first responders under the Homeland Security Grant Program. The unusual allocation formula used in this program was included in the Patriot Act. Here’s how it works. Each state and the District of Columbia is guaranteed .75 percent of total funds. Each territory is guaranteed .25 percent. Thus 40 percent of the funds are divided equally among the states, regardless of size, population or threat. The executive branch has leeway in allocating the remaining 60 percent.
In 2002, 2003 and 2004 DHS chose to allot the money according to population, without consideration for risk. The combination of per capita and per state allocations led to varying results. Wyoming received $61 per capita in 2003, while California gained $14. North Dakota received $52 while New York collected less than $25 per capita.
Small states justify this disparate result on the grounds that each state requires a minimum level of funding since certain activities have to be funded regardless of the size of the population. Larger states and in particular, larger cities argue that an attack in Casper, Wyoming would kill far fewer people than an attack in New York City simply by reason of population density. Moreover, terrorists are less likely to target rural areas. Therefore the allocation formula should consider these factors.
The 9/11 Commission has recommended that homeland security funds be allocated “strictly on an assessment of risks and vulnerabilities.” In its 2005 budget, the Bush Administration has requested that more money be allocated to grants for high-risk cities, but it also recommends cutting the overall state and local homeland security assistance budget by $642 million.
Some officials have recognized that the funding conditions and formula force them into justifying on the basis of fighting terrorism an expenditure that really is needed for other urgent needs that are ineligible for federal funds. Wyoming Governor Dave Freudenthal candidly observes, “If you’re trying to pick up an ambulance, you may know that the ambulance will be used for natural disasters, but the paperwork will have to reflect terrorism. That’s the problem. Money distorts objectivity.”
Some cities are clearly spending more in security costs than they are receiving from the federal government. New York City may be the poster child for this disparity. Budget cutbacks in New York City have resulted in 5,000 fewer police on the street than there were in 1999. Another 1,000 have been pulled from normal duty to work on terrorism prevention. As of March 2004 the city estimates it had received $206 million in federal grants. But the city spent more than $200 million for increased security in 2002 alone, and estimates its counter terrorism needs at $900 million.
The Urban Area Security Initiative was created in April 2003 to provide additional funding (on top of the Homeland Security Grant Program) to the country’s seven most at-risk cities – New York, Washington, Los Angeles, San Francisco, Seattle, Chicago and Houston. But after Congress received calls from irate officials whose cities had been left out, the list grew to 30 and later 50. These cities will share $675 million in fiscal year 2004.
More than $8 billion has been appropriated since September 11, 2001 to improve local preparedness. But more than half has not been spent, largely because the states have not disbursed the money to local governments. This creates the second level of complexity and ineffectiveness in the system.
According to the U.S. Council of Mayors fiscal year 2003 funds were to have been allocated by states by July 30, 2003 at the latest. But at the end of May 2004, 52 percent of city governments had neither received funds nor been notified that they would receive funds.
DHS Secretary Tom Ridge established a task force in March 2004 to examine the funding process and make recommendations to speed distribution of funds. The task force found obstacles on every level, from federal requirements that money be disbursed on a reimbursement basis, to state and local procurement procedures, to the complexity of the grant distribution process. It made a number of recommendations to ease regulations and standardize the procedures from state to state in order to speed up the disbursement process. But it also found that while plans and purchasing for the long-term are important, local governments have urgent security needs and should be allowed to use grant money to offset the personnel costs of securing critical infrastructure and major events.
Will these changes be implemented? Will they work? Only time will tell. In May 2004 Los Angeles Mayor James Hahn estimated the city has received about $30 million from the federal government to cover about $150 million in security expenditures. But he noted more recently, “There were some problems at the start in getting payments but it seems to be much smoother now.”
Some state and local governments have grown skeptical of the need to respond to national orange alerts if a specific threat to their state is not detected. Remember, they are not required to do so.
“It creates incredible problems: overtime, financial, functional,” said Arizona Homeland Security Director Frank Navarette. Seattle Police Chief Gil Kerlikowske says his department is struggling with a “perfect storm” of conflicting security and economic needs. “Being a port city, we increased our patrols. We put SWAT teams on overtime. We don’t do that anymore.” “You take the orange alert with a grain of salt,” Portland, Oregon Police Chief Mark Kroeker. “It’s a pragmatic approach mixed with the current financial crisis.”
The most recent orange alert creates new problems. It is more specific in its location, but its timeframe is uncertain. In his August 1 press conference announcing the code orange alert, DHS Secretary Ridge said “I don’t think you necessarily should put a timeframe around when these targets, if they were ultimately the subject of an attack, would be attacked.”
The information that tipped off this latest alert was gathered three to four years ago, and possibly updated as recently as January 2004. Yet the threat is being treated as immediate. This raises the question of when a terrorist threat expires. If nothing new is learned about the existing threat in coming weeks, asks New York Senator Charles Schumer, then what do you do? “Do it until the election? After the election? These are very difficult decisions to make.”
As things stand now, vehicle searches, armed patrols and street closures in New York, New Jersey and Washington D.C. could continue for the foreseeable future. The chief of the U.S. Capitol Police estimates increased security will cost $3 million a month for his department alone. And cities like Jersey City – which is currently spending an additional $16,000 a day(almost $6 million a year) for overtime to secure the Holland Tunnel – might incur the added costs of an orange alert indefinitely.
The increased costs of homeland security have come at a time when cities and towns are facing serious financial problems, including reductions in tax revenues and cuts in state and federal aid. Local officials note that when local spending for security is not federally reimbursed, the money has to come out of city budgets, and that means local public services suffer. In the case of Los Angeles, City Council member Jack Weiss notes that this has meant “$2 million a week is not being spent on anti-gang efforts, street repaving, airport upgrades and fire protection.”
Baltimore Mayor Martin O’Malley says police and fire departments are suffering from the lack of federal support for anti-terror efforts. He soberly notes, first responders cannot continue to finance homeland security responsibilities “with increased property taxes and fire hall bingos.” He points out that the federal government has reduced funding for programs that aid local police departments. A spokesman for the White House Office of Management and Budget says the total amount of money has not been reduced but instead has been diverted so that it flows through the Department of Homeland Security.
Joe Polisar – Chief of Police in Garden Grove, California and the president of the International Association of Chiefs of Police – likens such a diversion to the federal government “robbing Peter to pay Paul.” The net effect, he predicts, will be harmful. Justice Department grants that went directly to cities to fight crime have helped lower the crime rate. Department of Homeland Security grants are not intended to fight crime and thus will not help police departments in the same way. Louisville, Kentucky Police Chief Robert White agrees: “There have been a lot of financial resources put toward homeland security…I would want it to go directly to community policing, which does have an impact on homeland security.”
Despite assistance from federal homeland security grants, Los Angeles County Sheriff’s Department has let go 1,200 deputies in the past two years. On the November 2 ballot Los Angeles County voters will have the opportunity to support or reject the Public Safety and Homeland Security Tax Act, which would raise the county’s sales tax by a half-cent to pay for more police officers and sheriffs’ deputies.
 Red signifies a Severe risk of terrorist attacks. Orange denotes a High risk Yellow signifies an Elevated risk. Blue indicates Guarded risk. Green means Low risk.
 The dates were September 10 to 24, 2002; February 7 to 27, 2003; March 17 to April 16, 2003; May 20 to 30, 2003; and December 21, 2003 to January 9, 2004. DHS also issues threat advisories and information bulletins for specific threats that do not require changes in the national threat level. Threat advisories contain information about incidents or threats targeting critical national infrastructure or key assets. Information bulletins communicate information of a less urgent nature to those responsible for the nation’s critical infrastructure. They include advice on protective measures that could be taken by law enforcement agencies.
The Justice Department, the FBI and the White House also issue terror warnings, even though under the Homeland Security Act and Bush administration rules only DHS can publicly issue threat warnings. For example, on May 27, 2004 Attorney General John Ashcroft held a press conference in which he warned of attacks “in the next few months”. DHS maintains this was done without their knowledge. Washington Post, May 28, 2004.
On August 13, 2004 a White House official, speaking to reporters on the condition of anonymity, warned of terror attacks, saying the Bush administration believes there is a “preelection plot” for attacks in August, September or October. But there was no DHS announcement or information in addition to that announced in support of raising the threat level on August 1, and the official admitted “I have seen no indication of an imminent operation.” Washington Post, August 13, 2004.
 U.S. Conference of Mayors, Third Mayors’ Report to the Nation: Tracking Federal Homeland Security Funds Sent to the 50 State Governments, June 2004.
 Jack Weiss, “Orange Crunch”, New York Times. January 14, 2004.
 Putnam County News and Recorder. March 12, 2003.
 In 2003 Operation Liberty Shield (which was a short-term program for domestic protection at the start of the Iraq war) distributed $2.23 billion – of which $200 million was formula-based grants and $700 million was discretionary grants for protection of borders and critical infrastructure. These funds could be used to pay personnel costs. Some states were able to cover orange alert costs throughout 2003 with this money; others were not.
 California received the largest allocation ($176 million). Texas was second ($115 million) and New York third ($103 million). In addition to the Homeland Security Grant Program, smaller amounts have been designated for planning and infrastructure in public health, port and rail security, and emergency management. The Transportation Security Administration provides for reimbursement of local law enforcement costs incurred in providing security at airports.
 The five U.S. territories are American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands.
 Report of the Task Force on State and Local Homeland Security Funding, June 17, 2004. This includes money disbursed in 2003 in Operation Liberty Shield – the short-term domestic protection effort that accompanied the Iraq invasion. Liberty Shield funds can be used to pay personnel costs, and only one-third of the money received by states had to be disbursed to local governments.
 U.S. Conference of Mayors, Third Mayors’ Report to the Nation: Tracking Federal Homeland Security Funds Sent to the 50 State Governments, June 2004.
 Task Force on State and Local Homeland Security Funding, June 2004.
 Daily News, My 4, 2004.
 Capitol Hill Blue, June 2, 2003.
 Department of Homeland Security, Press Release, August 1, 2004.
 New York Times, August 4, 2004.
 Jack Weiss, “Orange Crunch”, New York Times, January 14, 2004.
 Bob Herbert, “A War Against the Cities”, New York Times, July 30, 2004.
 The three programs administered by the Justice Department are the Community Oriented Policing Services Program begun by President Clinton, the Local Law Enforcement Clock Grants Program, and the Byrne Memorial Grant Program.
 Chad Kolton, a spokesman for the Office of Management and Budget said, “In the post-9/11 world, where terrorism is one of our most critical concerns, resources that were formerly provided through the Department of Justice will now be provided through the Department of Homeland Security.” New York Times, July 27, 2004.
 Gannett News Service, June 3, 2004.
 New York Times, July 28, 2004.