National Data | Schwarzenegger in Denial On Illegal Alien Costs
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Ahnold is at it again. The governor of the state with one-quarter of all U.S. illegal aliens says it would be a "big mistake" to blame them for the state's looming $8 billion budget problem:

"I can guarantee you, I have been now four years in office in Sacramento, I don't think that illegal immigration has created the mess that we are in."

Memo to the Gov: When it comes to analyzing the cost of illegals, California has been here, done that.

In the early 1990s California faced a sinking economy not unlike today's. Social welfare caseloads exploded, state revenue declined by more than 25 percent and the state's budget deficit was an unprecedented one-third of total general fund spending.

Caseloads continued rising even after the recession ended, a trend many officials blamed on illegal immigrants. In 1993 California Governor Pete Wilson sued the federal government for the costs of state services to illegals, arguing that Washington mandated the provision of such services while failing to prevent the illegal influx. Five other magnet states—Arizona, Florida, New York, New Jersey, and Texas—joined the suit.

The perception of fiscal burden propelled passage of Proposition 187, a California initiative denying certain services to illegal aliens.

Perhaps the current Gov was filming True Lies when the Wilson Administration released its analysis of the budgetary consequences of illegal aliens. [Philip J. Romero et al., Shifting the Costs of a Failed Federal Policy: The Net Fiscal Impact of Illegal Immigrants in California (prepared for the Governor's Office of Planning and Rsearch and the California Department of Finance, September 1994. PDF]

The 1994 study estimated illegals (and their U.S.-born children):

  • received $4.3 billion in state services
  • paid about $700 million in state taxes
  • received about $3.6 billion more than they paid in taxes

The study's author, Philip J. Romero, was up front about the uncertainties surrounding such estimates. For each important parameter—tax rates, benefit payments for illegals and natives, for example—Romero presented a range of estimates—high, median, and low.

His high-end tax estimate assumed that illegals pay taxes at the same rate as the average Californian—highly unlikely given lower immigrant incomes and a progressive state income tax. Even at this unreasonably high tax figure, however, illegals were estimated to have received roughly $5 in services for every dollar they paid in taxes.

Surprise, surprise: the immigration lobby attacked Wilson's study. But they quickly quieted down when, in 1997, the Jordan Commission revisited the same question—and reached the same conclusion. . The commission's analysis of California, done by the National Research Council (NRC) and published in The New Americans (1997), found a significant fiscal transfer from natives to immigrants

In a section on California's budget, the Commission report presented evidence of a significant fiscal burden imposed by immigrants:

"Combining the state and local public-sectors, native households pay an additional $1,178 per household in revenues above services received to support a net fiscal transfer to the average immigrant-headed household of $3,463 ….As in New Jersey, the immigrant group making the biggest contribution to this net fiscal burden on native households in California is families from Latin America." [The New Americans: Economic, Demographic, and Fiscal Effects of Immigration, P 280]

Most of the fiscal burden occurred at the state government level, where native households paid $895 more tax than they received in services—the difference going to immigrant households.

As I reported in, the NRC figures—adjusted for inflation and growth in the state's immigrant population—imply California immigrants receive $9.3 billion more in state expenditures than they pay in state taxes.

I may have grossly under-estimated the damage. (Read on.)

In a recent article in The Social Contract Magazine, Romero updates his 1994 study [Racing Backwards—The Fiscal Impact of Illegal Immigration in California, Revisited (Summer 2007)].

He now estimates that California's illegals receive from $9.6 billion to $38.2 billion more state services than they pay in state taxes. His median estimate—$21.2 billion in 2005—equals nearly 22 percent of state spending.

Inescapable conclusion: Deport California's illegal immigrants and the current $8 billion budget shortfall would become a $13 billion budget surplus.

Do the math, Gov.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.

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