Magazine article Government Finance Review

Fiscal Impacts of Undocumented Immigrants

Magazine article Government Finance Review

Fiscal Impacts of Undocumented Immigrants

Article excerpt

Urban Institute researchers shed light on undocumented immigrants issues by developing data on incarceration, public-school enrollment and taxes in the seven most heavily impacted states.

An increasingly acrimonious debate is being waged between states with large numbers of undocumented aliens and the federal government over who should bear the costs of providing services for these aliens. There are three major reasons behind the rising tensions: 1) undocumented immigration to the U.S. has continued more or less unabated, despite the enactment of laws against hiring undocumented aliens; 2) immigrants - particularly undocumented aliens - are concentrated in a handful of states, which means costs are unevenly distributed across the nation; and 3) this population is, on average, poorer and less educated than natives, legal immigrants and refugees, and thus pays less in taxes and generates a small overall fiscal deficit.

Some states are demanding federal reimbursement for the costs of providing services such as elementary and secondary education for undocumented alien children, incarcerating illegal aliens in state prisons [TABULAR DATA OMITTED] and emergency medical care under Medicaid for undocumented aliens.

To address these concerns, the Office of Management and Budget and the Department of Justice asked the Urban Institute to study the fiscal impacts of undocumented aliens in seven states with the largest numbers for undocumented aliens - California, New York, Texas, Florida, Illinois, New Jersey and Arizona.

Methodology and Limitations

Urban Institute (UI) researchers estimated the state and local education and state incarceration costs as well as the state income, state sales, and state and local property taxes attributable to undocumented aliens. The researchers also developed "benchmarks" to assess Medicaid costs reported by the states. They compared UI estimates for each state with those reported by that state, and assessed the methodology that each state used to make its estimates.

The use of uniform procedures and official data sources ensured that differences between states did not simply reflect differences in estimation methods.

Because other expenditures and revenue sources were not analyzed, the researchers caution that their estimates cannot be used to calculate the net costs of undocumented aliens. The study also does not consider the impact of undocumented aliens on the state's economies as workers, consumers or business owners. The researchers did not discuss whether the federal government should reimburse states and local areas for costs they incur because of the presence of undocumented aliens or how such reimbursements should be allocated.

Further, the study does not estimate the savings to states if undocumented aliens were denied services or if the federal government took sole responsibility for providing these services. This is partly [TABULAR DATA OMITTED] because the estimates are based on mean costs (total expenditures for a service divided by the number of users) and not on marginal costs (the amount saved if undocumented aliens did not use the service).

Number of Undocumented Aliens

Developing estimates of expenditures for and revenues from undocumented aliens, as well as assessing the cost estimates of the states, largely depends on having accurate estimates of the number of undocumented aliens in each state. The researchers used Immigration and Naturalization Service (INS) estimates of undocumented populations because investigation of alternative estimates revealed that the INS employed the best methodology and assumptions and provided the most geographic detail. The INS estimates show:

* 3.4 million undocumented aliens lived in the U.S. in October 1992, and this population grew by an estimated 299,000 each year between 1988 and 1992;

* 86 percent (2.9 million) of the undocumented aliens in the U.S. were in the seven states studied;

* California had the highest concentration of undocumented residents - 4. …

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