Using the 2005 National Association of County and City Health Officers Profile of Local Health Departments data set, bivariate probit and Heckman selection models were used to test the hypothesis that the level of federal funding received for bioterrorism preparedness is related to the preparedness activities undertaken by local health departments. Overall budget, leadership, and crisis experience are found to be the most important determinants of local preparedness activity, but Centers for Disease Control and Prevention preparedness funding plays a mediating role by building capacity through the hiring of one key leadership position, the emergency preparedness coordinator. Additional research is needed to determine the potential impact of these funds on other aspects of the local public health system, such as the scope of services delivered, to determine secondary effects of the program.