Allocating U.S. Department of Homeland Security funds to States with explicit equity, population and energy facility security criteria

Allocation of funds to states and local governments by the U.S. Department of Homeland Security (DHS) has been challenged for relying too heavily on the U.S. Patriot Act formula that contains set-asides for each state. Yet, DHS's recent efforts to include more vulnerability/risk information have been criticized for lacking transparency. Using only off-the-shelf data and an off-the-shelf optimization model, which is a compromise between politically grounded formulas and complex analyses supported by massive data manipulations, the authors maximize need (defined and represented here as funds to protect electrical-generating capacity) subject to explicit constraints based on political equity and population size but introduce risk-related criteria as well in the form of ease of securing the facilities and public perception of risk. The model results closely approximate the DHS allocations at the state level when electricity generation and its retail price are maximized subject to moderate set-asides for political equity and population size. The advantages of this approach are that the results are transparent and sensitivity analysis is relatively easy to do. The advantages and disadvantages of the approach presented here are compared with more sophisticated alternatives.