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May 1994, Volume 1, Number 4

Illegal Immigration: Numbers, Benefits, and Costs in California

California has been at the forefront of the debate over whether the federal government should reimburse states for the costs they incur to serve illegal immigrants. Over 300 people attended an April 29, 1994 conference in Sacramento, California to hear presentations on the number and the benefits and costs of unauthorized immigrants.

There is far more consensus on the number of unauthorized immigrants than on their benefits and costs. For example, the consensus is that there are about 1.6 million unauthorized immigrants in California. However, there is much less consensus on how much these immigrants pay in taxes and cost in services, and this uncertainty, combined with inabilityof experts to predict the future trajectory of the illegal immigrants and the economy, means that there is evidence on both sides of the central question: will the unauthorized immigrants arriving today be a future benefit or burden?


In January 1994, Governor Wilson estimated that the state incurred $2.3 billion in unreimbursed costs to provide federally-mandated services to unauthorized immigrants--$1.7 billion for education, $377 million for corrections, and $300 million for health care costs. The corrections and health care cost estimates are based on counts of unauthorized aliens incarcerated and served; the education cost estimate is based on the estimated number of illegal aliens in the state.

Wilson argues that, since the federal government has exclusive control over immigration policy, the federal government should reimburse states for all of the costs they incur to provide services to unauthorized immigrants, especially those services, such as tuition-free education for school-age children, that the federal government or courts require the states to provide. Once the principle of federal reimbursement is established, there remains the question of how much the federal government should pay.

There is near agreement on the cost of providing these services to unauthorized immigrants and their children, e.g., incarcerating a prisoner in California costs about $22,000 per year. The number of illegal aliens is the critical variable in determining how many illegal alien children there are and thus how much federal reimbursement California can expect. [Some argue that only the marginal cost of services for illegal aliens should be reimbursed, since there would be, e.g., a criminal justice system even if there were no illegal aliens. Marginal costs could be higher than average costs, if new schools or prisons had to be built; or lower, if the aliens fill otherwise vacant slots].


There was apparent consensus on four points: 1) the number of illegal aliens in the US today is about 3.8 million; 2) their number is increasing by about 300,000 annually; 3) the California share of the illegal alien population decreased from 50 percent in the mid-1980s to about 43 percent; and, 4) the Mexican share of US illegal aliens has decreased from 61 percent in the mid-1980s to about 39 percent. These data are from the INS paper cited below.

When Wilson's staff was preparing the budget in January 1994, they used an "unofficial" estimate that there were four million unauthorized aliens in the US, and 2.1 million in California. Wilson requested a $2.3 billion federal reimbursement, or roughly $1,000 per illegal alien in the state.

There are several benchmark estimates of the illegal alien population in the US. Based on an analysis of Census data, it was estimated that there were 2.1 million illegal aliens in 1980. This number then increased--by an average 388,000 annually--so that in early 1987, there were thought to be about 4.8 million illegal aliens in the US. Three million of these illegal aliens applied for legalization in 1987-88, including 1.6 million or 53 percent in California.

There is a now a rough consensus on what happened since 1987-88. The Census estimates that there were about 3. 5 million illegal aliens in the US in 1992, including 1.2 to 1.7 million in California. The INS, using a different methodology, estimated that there were 3.4 million, including 1.4 million in October 1992. The California Department of Finance, estimated that there were 2.6 million unauthorized US residents in 1993, including 1.3 million in California.

The INS estimates that the number of illegal aliens in the US is increasing by about 300,000 annually, and by 125,000 per year in California. This clearly suggests that IRCA failed to stem illegal immigration. If the INS numbers are projected to the year 2000, there would be 5.8 million illegal aliens in the US, about the same as in early 1987. California would have 2.4 million illegal aliens at the start of the next century.

These illegal aliens are concentrated in a few states and counties. The Big Six states--California (1.4 million illegal aliens in October 1992), New York (449,000), Texas (357,000), Florida (322,000), Illinois (176,000), and New Jersey (116,000)--include 85 percent of the illegal aliens in the US. In California, Los Angeles county has almost two-thirds of the state's illegal aliens.

These data are suggestive rather than definitive. One of uncertainties in making illegal alien estimates is that very little is known about SAWs, the 1.1 million mostly young Mexican men who became US immigrants because they did at least 90 days of farmwork as illegal aliens in 1985-86. The massive fraud in this program--perhaps two of three persons approved did not satisfy the program's requirements--encouraged new streams of aliens to head north, and the growth of the false documents industry and labor contracting has enabled illegal aliens to continue to find US jobs. What remains unclear is how fast SAWs and the "new-new" immigrants arriving are bringing their families to the US.

Immigration and California Politics According to polls, the top four issues for California voters are the economy, crime, immigration and education. The state lost 550,000 jobs, mostly in high-tech industries, over the past 3.5 years--so that relatively high-income Americans moved out of California as poor immigrants moved in. (Due in part to moneys flowing into California after the January 17 earthquake, 164,000 jobs were added in the first quarter of 1994, heralding a possible recovery). There is general agreement that the state government has a limited ability to restart the economy on its own, and most candidates have already endorsed the "three strikes" initiative that mandates life in prison for a third felony conviction to deal with crime.

This leaves immigration and education. In both cases, California hopes for federal dollars that can stimulate an economic revival. Other states with large illegal immigrant populations are feeling the same pressures. A poll in September 1993 found that 63 percent of New Yorkers (New York has 13 percent of the US population of illegal aliens), want immigration reduced, but leading politicians in the state are not discussing the issue. Florida, with 10 percent of the US illegal alien population, sued for federal reimbursement, but politicians there are not engaged in anti-immigrant political rhetoric, perhaps because Cuban-American immigrants there vote.

Wilson's request for federal reimbursement is supported by both Democrats and Republicans in the State Legislature, although California commentators note that: 1) some Democrats in the Legislature are "silent partners" in the sense that they want federal reimbursement, but abhor the anti-immigrant rhetoric unleashed by Wilson; and, 2) the state's 54-member Congressional delegation is sharply divided over what to do about illegal immigration. It includes some of the most vehement open- and closed- border Congressional representatives. Middle-of-the-road Democrats such as Senator Feinstein has been quoted as saying that, "the day when America could be the welfare system for Mexico is gone."

With budget deficits looming, California voters are unwilling to approve tax increases and the Legislature is unwilling to cut programs, federal reimbursement seems like the easiest way to close the state's budget deficit. California wants at least $1 billion of the $2.3 billion it is requesting, but others are quick to point out that the California politicians demanding reimbursement played leading roles in the immigration reforms that created today's immigration dilemma.

Benefits and Costs

There is a great deal of disagreement over the costs and benefits of immigrants to the US and California. Studies in the early 1980s in Texas and New York concluded that the taxes paid by immigrants exceeded the cost of providing public services to them, but that the federal government got the surplus of taxes over expenditures, and local governments had deficits. Los Angeles did a study in 1992 that reinforced this conclusion.

Donald Huddle of Rice University set the benchmark for today's debate with a study that concluded that the legal and illegal immigrants who arrived since 1970 cost the US $42.5 billion in 1992, and $18.1 billion in California. According to Huddle, 7.2 million immigrants arrived legally and illegally in California since 1970, and the state incurred costs of $23 billion to provide them with services--half of the costs were for education and health care, and one-sixth were due to the costs of providing services to US residents displaced by these immigrants.

As with all such studies, Huddle made assumptions about how many illegal aliens there are, their usage of welfare and other public services, the taxes they paid, and their indirect economic impacts. Jeff Passel of the Urban Institute reviewed and revised Huddle's US estimates, and his calculations turned the $42 billion net cost into a $29 billion net benefit.

Most of the $70 billion difference between these studies arises from their estimates of the taxes paid by immigrants--Huddle assumes that post-1970 immigrants paid $20 billion in taxes to all levels of government, and Passel assumes they paid $70 billion. And the major reason for the difference in tax estimates is that Huddle did not include the 15 percent of each worker's earnings that are paid in Social Security taxes, while Passel did--this accounts for over one-third of the $70 billion difference.

Huddle excluded Social Security taxes because, in his view, contributions today need to be offset by the promise of benefit payments to immigrants when they retire. Passel included them because the federal government treats Social Security on a pay-as-you-go basis.

Next Steps

There was general agreement that "something" will be done about illegal immigration in 1994, including some federal reimbursement to states and cities to cover their cost of providing services to illegal aliens. What is not clear is whether federal action will stop with reimbursement of selected state and local government costs, or whether the prospect of continuing illegal immigration and continuing reimbursement will produce broader immigration reforms.

As Congress and the public re-debate what to do about illegal immigration, it was noted that past "Grand Bargains" between restrictionists and admissionists have generally failed--the carrot and stick of sanctions and amnesty did not stop illegal immigration. Indeed, despite 200 years of experience with immigration, the unanticipated consequences of US immigration reforms continue to have more lasting effects than their anticipated effects.

By Philip Martin.