Some local governments are refusing to comply with federal anti-terrorism and immigration laws and may be putting the nation at a higher risk, an immigration watchdog group warns.

"Unless the White House exerts much stronger leadership in the area of immigration controls, the state patchwork of inconsistent policies will continue to be a primary avenue used by foreign terrorists to exploit weaknesses in the national immigration control system," reads the Federation for American Immigration Reform (search) (FAIR), which issued the "State of Insecurity" report to coincide with the second anniversary of the Sept. 11, 2001, terror attacks

Immigration groups on both sides of the reform debate agree that Capitol Hill dropped the ball on immigration reform, and that has left states and cities to cope with immigration issues on their own.

"State and local communities are trying to deal with the fact that there are millions of people who live here that have no civil rights, can't vote, have no path to citizenship if they want it and essentially have to live in the underground," said Doug Rivlin, spokesman for the National Immigration Forum (search). "They're trying to deal with the black market."

Some of the Sept. 11 hijackers were in the United States illegally and more than half of them had fraudulent driver's licenses issued by Virginia, New Jersey and elsewhere.

With an estimated 8 million to 11 million illegal aliens living in this country, Washington has called for cracking down on illegal immigrants and better securing of the nation's borders.

President Bush also signed into law the USA Patriot Act (search), which requires federal intelligence agencies to work with local governments and law enforcement in pursuing terrorism suspects.

But scores of communities across the nation have formally condemned the Patriot Act and some have even told police not to cooperate with federal officials if asked for information.

Arcata, Calif., slaps city employees who work with federal officials with a $57 fine.

The Palo Alto City Council in California prohibits its police from aiding the FBI in Patriot Act searches, interviews or surveillance without evidence that a crime has been committed.

"We take an oath to uphold the Constitution and that's the bottom line for us," said Palo Alto police chief Lynne Johnson. "We believe we are still able to protect the people of this community, but won't do so by violating people's constitutional and civil rights."

Other communities, such as Seattle and Portland, Maine, have adopted so-called "sanctuary," or non-cooperation policies, that say local police don't have to report illegal immigrants to federal authorities.

Cities like Baltimore, Denver and Detroit have advised their police departments not to enforce federal immigration laws unless there's a good reason to suspect other criminal behavior has taken place.

Some states, primarily California, have granted driver's licenses and other benefits to illegal aliens.

To make sure states are in line with federal homeland security efforts, federal lawmakers need to pass strong federal laws that preempt state statutes, experts say.

But so far, federal efforts to deny cities money for noncompliance with the Patriot Act have failed, and Congress has not been able to pass a comprehensive driver's license reform bill that would standardize rules nationwide.

"Let's not kid ourselves; people are driving to work," California Gov. Gray Davis said when he signed the bill into law last week. "Everyone benefits by having drivers on the road know the rules of the road and presumably be a safer driver."

But critics say the lax rules on identification cards open the door to terrorists.

"The bottom line is, the only people that need this are people that have no legal right to be here to begin with," said Rep. Elton Gallegly, R-Calif.

Aliens must present two forms of identification to get the license but federal agents say those forms of ID — including the matricula consular card issued by the Mexican consulate to any Mexican who applies for one — could easily be faked.

"It is believed that consular ID cards are primarily being utilized by illegal aliens in the United States," Steve McCraw, the FBI's assistant director of the Office of Intelligence (search), recently told a House Judiciary subcommittee. The cards are "not a reliable form of identification, due to the non-existence of any means of verifying the true identity of the card holder."

Rivlin said local police don't want to be in charge of enforcing federal laws, especially since, second only to tax codes, immigration law is the most complicated on the books.

Police also fear expensive civil rights violations lawsuits, he added.

Rivlin added that immigrants already are reluctant to come forward with information on community crime and domestic disputes because they fear deportation and enforcing federal law could make getting help in local cases more difficult.

"You don't want to drive a wedge between police and immigrant communities," Rivlin said.

FAIR's executive director Dan Stein countered that many aliens obtain fake identification documents to work, commit perjury to get those documents, and participate in a myriad of other felonies in the process of attaining them, thus making it police business.

"If and when another significant terrorist incident happens and it involves a driver's license from one of these states" that's allowing illegal aliens to drive, "what are people going say about these politicians who are responsible?" he asked.

Fox News' William LaJeunesse contributed to this report.