Over the past two decades, most efforts to estimate the fiscal impact of immigration in the United States have concluded that, in aggregate and over the long term, tax revenues of all types generated by immigrants—both legal and unauthorized—exceed the cost of the services they use. Generally, such estimates include revenues and spending at the federal, state, and local levels.

However, many estimates also show that the cost of providing public services to unauthorized immigrants at the state and local levels exceeds what that population pays in state and local taxes. It is important to note, though, that currently available estimates have significant limitations; therefore, using them to determine an aggregate effect across all states would be difficult and prone to considerable error.

The impact of unauthorized immigrants on the federal budget differs from that population’s effect on state and local budgets primarily because of the types of services provided at each level of government and the rules governing those programs.

Various court decisions also restrict the authority of state and local governments to avoid or constrain the cost of providing services to unauthorized immigrants who reside in their jurisdictions. In general, state and local governments bear much of the cost of providing certain public services—especially services related to education, health care, and law enforcement— to individuals residing in their jurisdictions.

Such programs constitute a major portion of those governments’ annual expenditures, but spending by state and
local governments on services specifically provided to unauthorized immigrants makes up a small percentage of those governments’ total spending.

Another factor that affects state and local spending is the extent to which the unauthorized population uses certain public services. For example, because unauthorized immigrants are less likely to have health insurance, they are more likely to rely on emergency facilities or public hospitals for treatment of nonemergency illnesses and other health-related problems. In 2000 and 2001, researchers from the RAND Corporation and the University of California surveyed immigrants in Los Angeles County and found that 65 percent of those respondents who identified themselves as unauthorized had no health insurance in the two years preceding the survey.

In a separate study, the Pew Hispanic Center estimated that in 2004, more than 50 percent of those children who were themselves unauthorized immigrants and almost 60 percent of adult unauthorized immigrants were uninsured. Moreover, 25 percent of those children who, by virtue of their birth, were U.S. citizens—but whose parents were unauthorized immigrants—also lacked health insurance.

In terms of public education, unauthorized immigrants who are minors increase the overall number of students attending public schools, and they may also require more educational services than do native-born children because of a lack of proficiency in English. Analyses from several states indicate that the costs of educating students who did not speak English fluently were 20 percent to 40 percent higher than the costs incurred for native-born students.

In addition to differences in the types of services that federal, state, and local governments provide and the extent to which the unauthorized population participates in those programs, the income that unauthorized immigrants earn and the taxes they pay also contribute to their net impact on state and local budgets. Unauthorized immigrants typically earn less than do native-born citizens and other immigrant groups and, partly as a result, they also pay a smaller portion of their income in taxes.

One study conducted by analysts at the Urban Institute found that in 1998, unauthorized immigrants in New York State paid an average of 15 percent of their income in federal, state, and local taxes; other immigrant groups paid between 21 percent and 31 percent.8 The average household income for unauthorized families is significantly less than that of both legal immigrants and nativeborn citizens; therefore, that income is taxed at a lower rate than the income of other groups. The Pew Hispanic Center estimates that in 2004, the average annual income for unauthorized families was $27,400, compared with $47,800 for legal immigrant families and $47,700 for native-born families.

A related effect is that lower-paying jobs also result in unauthorized immigrants’ having less disposable income to spend on purchases subject to sales or use taxes. State and local governments typically rely more heavily on revenues from those and other sources (such as property taxes) than revenues generated by taxes on income.

Illegal Immigration

Illegal immigration is a source of mounting concern for politicians in the United States. In the past ten years, the U.S. population of illegal immigrants has risen from five million to nearly twelve million, prompting angry charges that the country has lost control over its borders.

Download The Impact of Unauthorized Immigrants on the Budgets of State and Local Governments

PDF format, 318KB, 24Pages.

The Congress of the United States
Congressional Budget Office

PREFACE
According to available estimates, there are about 12 million unauthorized immigrants in the United States. Federal, state, and local governments spend public funds that benefit those immigrants, and those immigrants pay individual income, sales, and property taxes.

Most available studies conclude that the unauthorized population pays less in state and local taxes than it costs state and local governments to provide services to that population. However, those estimates have significant limitations; they are not a suitable basis for developing an aggregate national effect across all states.

This paper, requested by the Chairman and Ranking Member of the Senate Finance Committee, is one of several reports prepared by the Congressional Budget Office (CBO) that present facts and research on immigration. The paper focuses on the estimated costs that certain state and local governments incur for providing various services—especially those related to education, health care, and law enforcement—to unauthorized immigrants. It also looks at the estimated taxes those individuals pay and at certain types of federal assistance that are available to states to help provide such services. In keeping with CBO’s mandate to provide objective, nonpartisan analysis, the paper makes no recommendations.

Melissa Merrell of CBO’s State and Local Government Cost Estimates Unit wrote the paper under the supervision of Peter Fontaine, Theresa Gullo, and Robert Sunshine. Douglas Hamilton is the coordinator of CBO’s series of reports on immigration. Raymond J. Hall and Eric Schatten reviewed the manuscript for factual accuracy, and Lauren McMahon provided research assistance. David Brauer, Patrice Gordon, Arlene Holen, Leo Lex, Noah Meyerson, Robert Murphy, Paige Piper/Bach, Lisa Ramirez-Branum, Eric Rollins, Ralph Smith, Shinobu Suzuki, and G. Thomas Woodward provided comments on early drafts of the paper, as did Paul Cullinan and Donald B. Marron (both formerly of CBO), and Alan Auerbach of the University of California, Berkeley. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.)

Loretta Lettner edited the paper, and Christine Bogusz proofread it. Maureen Costantino prepared the paper for publication and designed the cover. Lenny Skutnik printed the initial copies, Linda Schimmel coordinated the print distribution, and Simone Thomas produced the electronic version for CBO’s Web site (www.cbo.gov).

Peter R. Orszag
Director

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