Benefit-cost Analysis and Real World Decision Making:
The case of homeland security equipment maintenance
13 Aug 2007 in Regulatory Economics
Critics say benefit-cost analysis is a bad tool for choosing whether to
regulate. Supporters say it's a good tool because it
mimics how people and institutions normally make rational
decisions. Today's example is homeland security equipment purchased by
the federal government but left unmaintained by local governments.
Washington Post staff writer Mary
Beth Sheridan says local governments received
expensive equipment intended to establish new homeland
security capabilities but have failed to maintain it:
In
2003, the FBI used a $25 million grant to give bomb squads across the
nation state-of-the-art computer kits, enabling them to instantly share
information about suspected explosives, including weapons of mass
destruction.
Four years later, half of the Washington area's squads can't communicate via the $12,000 kits, meant to be taken to the scene of potential catastrophes, because they didn't pick up the monthly wireless bills and maintenance costs initially paid by the FBI. Other squads across the country also have given up using them.
"They worked, and it was a good idea -- until the subscription ran out," said Mike Love, who oversees the bomb squad in Montgomery County's fire department. At the local level, he said, "there is not budget money for it."
This experience is consistent with past federal efforts to install
capacity and infrastructure, such as highways and bridges. Typically,
the federal government has made the initial capital investment and the
state or local government is responsible only for maintenance, a much
smaller expense. This is true both for the original Interstate Highway
System (in which the federal
share was 90%) and contemporary Congressional
earmarks (which fund new
roads, bridges, light rail, and bicycle paths but not
maintenance). Even though it was an integral part of the
original deal, state and local governments often did not
include funds in their budgets to cover maintenance.Four years later, half of the Washington area's squads can't communicate via the $12,000 kits, meant to be taken to the scene of potential catastrophes, because they didn't pick up the monthly wireless bills and maintenance costs initially paid by the FBI. Other squads across the country also have given up using them.
"They worked, and it was a good idea -- until the subscription ran out," said Mike Love, who oversees the bomb squad in Montgomery County's fire department. At the local level, he said, "there is not budget money for it."
This may appear to be "penny-wise but pound-foolish," but it could reflect rational decision making.
First, the total benefits to a state or local community from an initial infrastructure or technology investment might be less than the incremental cost of maintenance. These are projects that no rational decision maker who had to pay full cost would ever undertake. Of course, if the federal government is going to provide a free or heavily subsidized asset, local governments probably are foolish to decline it. That's especially true in cases like homeland security, where the probability of needing to use the expensive federally-provided equipment in an actual emergency is very low.
Second, in the 1970s Congress showed it was unwilling to hold the states to their end of the bargain in funding the Interstate Highway System. It began supplying significant funding in support of highway maintenance projects that previously had been state responsibilities. By doing so, Congress validated the actions of those states that had failed to fulfill their interstate highway maintenance responsibilities. And, it signaled to all states that it if they had been funding their own maintenance they should stop doing so right away. Even if the local value of highway maintenance exceeds the costs, it can be smart budget practice to stop treating it as a local responsibility and instead hold out for federal funding.
A similar pattern appears to have arisen in the case of federally supplied homeland security equipment. Sheridan says that some jurisdictions are belatedly budgeting for maintenance, but others are applying for federal grants to pay for maintenance or obtaining new federally-funded equipment. If history and incentives are useful guides, in a few years time they will be back seeking replacements when the maintenance bill comes due.