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It Pays To Stay: How Illegal Immigrants Have Access to Subsidized Social Programs

By Nick DiUlio

warning illegal immigration crossing signIn 2013, California Gov. Jerry Brown signed into law a bill that would allow the state’s illegal immigrants to obtain driver’s licenses. That law, known as AB 60, took effect in January of this year, leading to the expected licensing of more than 1 million undocumented immigrants. And while this initiative may have solved one particular problem (for better or worse), it also brought forth another perplexing quandary: How would these new drivers obtain auto insurance?

“It would be a tragedy if, after all this effort, the 1.4 million people who are getting driver’s licenses for the first time don’t have auto insurance,” said California Department of Insurance Commissioner Dave Jones in a statement.

Indeed, uninsured motorists are a significant problem, not only for California but the entire country. According to the nonprofit Insurance Research Council, about 13 percent of U.S. drivers are uninsured, and the cost of this problem is passed along to responsible drivers in the form of uninsured/underinsured motorist’s coverage—an expensive way for responsible drivers to protect themselves against the irresponsibility of those who willfully choose to drive without insurance.

But Jones also acknowledged that the cost of an annual auto insurance policy might be financially prohibitive to illegal immigrants living in the Golden State, which is why he teamed up with Senator Ricardo Lara in order to open the state’s Low Cost Auto Insurance Program to these newly minted motorists. According to Jones, premiums through this program would be less than $450 a year (or about $38 a month), which is about a third the cost of private auto insurance in California. At these rates, this would represent approximately a combined $900 million dollar subsidy.

According to California Department of Insurance spokeswoman Madison Voss, the state-approved insurance program provides motorists with basic liability coverage that is less than what most California drivers are required to carry. According to Voss, most drivers need liability coverage of at least $15,000 for bodily injury or death and $5,000 for property damage. The low-cost program's coverage for those categories, however, is $10,000 and $3,000. That’s how the state keeps its low-cost insurance plan so cheap.

But the differences in those costs are being passed on to legal California residents, and many of them are not pleased.

“Last year the California state government voted to give driver’s licenses to law-breaking illegals…and now the legislature is giving taxpayer subsidized insurance to illegals,” wrote conservative freelance columnist Warner Todd Huston on “So, the message to these lawbreakers is, ‘[Go] ahead and break our laws and we’ll give you freebies!’…Now that illegals are flocking to get their drivers licenses, the state is forcing legal citizens to pay for the illegals’ car insurance.”

To be sure, the heated atmosphere in California—which is one of 10 states now offering driver’s licenses to illegal U.S. residents—touches on issues well beyond driving and auto insurance. In recent years a growing degree of debate has surfaced around whether or not illegal immigrants are (or should be) receiving myriad financial benefits from state and federal agencies, including loans, public housing, college education, food stamps, unemployment, disability, and tax credits.

On its surface the concern is simple to understand: Illegal immigrants aren’t paying taxes but they are enjoying the benefits afforded by those who do. In other words, unlawful U.S. citizens are being subsidized by those who obey the law.

The nuances of this issue, however, are a bit more complex.

“When most people think of these questions they immediately think of things like welfare programs,” says Steven Camarota, director of research for the nonprofit Center for Immigration Studies, a think tank that examines and critiques the impact of immigration on the U.S. “And you might think illegal immigrants can’t use welfare programs. That would be a technically true statement, but it’s also a little more complicated than that.”

Consider, for instance, a 2013 report from the conservative think tank The Heritage Foundation, which claims the government provides four overarching types of services and benefits that can “pose large fiscal costs for U.S. taxpayers.” They include direct benefits like Social Security, means-tested welfare benefits like food stamps and Medicaid, the benefit of public education, and population-based services like police and fire protection.

“While illegal immigrants are explicitly barred from using some of these programs, it’s certainly not the case that no one is benefiting from a variety of subsidized services,” says Camarota.

For instance, Camarota points out that illegal immigrants with U.S.-born children are eligible for the Special Supplemental Nutrition Program for Woman, Infants, and Children (WIC), which provides assistance for nutritionally at-risk women, children, and infants up to five years old with “nutritious foods to supplement diets, information on healthy eating, and referrals to health care.”

Public education is another avenue through which illegal immigrants might enjoy subsidized benefits into which they are not paying. According to the Heritage report, education is “the single largest component of state and local government spending,” with the average, annual per-pupil cost of public and secondary students coming in around $12,300. According to Heritage, federal, state, and local governments spent more than $750 billion on education in 2010.

What’s more, 16 states now allow illegal immigrants to attend college at the subsidized, in-state price (or to receive financial aid), which comes at a price. For instance, more than 20,000 illegal immigrants applied for state financial aid in 2013 under California’s Dream Act, which allowed them to get fiscal help despite their immigration status. According to the Legislative Analyst’s Office, this will likely cost the state an estimated $65 million a year by 2017.

Another instance of illegal immigrants benefitting from government programs is the Temporary Assistance for Needy Families (TANF), which is designed to “help needy families achieve self-sufficiency” through block grants received by individual states. According to Camarota, recent studies have shown that half of the families enrolled in TANF are what’s known as “child only” families.

“That means the check is technically coming to the [U.S.-born] child, not the parent,” says Camarota. “This is extremely common, and it’s another example of how an illegal immigrant family may be able to benefit from a program for which it’s technically ineligible.”

Or consider eligibility for subsidized housing. According to Camarota, illegal immigrants can live in public housing if they have U.S.-born children. The housing subsidy may be prorated for the undocumented adult immigrant, but they are still enjoying a benefit into which they are not financially contributing.

“I don’t think most people realize that illegal immigrants can receive a whole host of benefits on behalf of their U.S.-born children,” says Camarota. “And the fiscal concern is that they don’t pay enough in taxes to make up for their consumption.”

According to the 2013 Heritage report, the average “unlawful immigrant household” received about $24,721 in government benefits and services in 2010 but only paid about $10,000 in taxes. The resulting deficit of more than $14,000 was “borne by U.S. taxpayers.” The report goes on to claim that all illegal immigrant households have “an aggregate annual deficit of around $54.5 billion.”

Despite the size of this figure, Camarota is quick to point out that it isn’t quite as substantial as it may seem.

“I think it’s a significant fiscal drain, but the size of government and the economy are so vast that everything is kind of small today,” says Camarota. “Even if illegal immigrants created $100 billion in fiscal deficit—and they don’t—that wouldn’t come close to equaling one percent of the gross domestic product. The aggregate economy is so vast that it’s like a heavily armored ship that can take a whole lot of hits. It’s just not that significant as a share of the total.”

However, Camarota points out that a more significant impact of so-called subsidies for illegal immigrants may be seen and felt on the local level.

For instance, imagine a public school or hospital is forced to shut down because it can’t afford a growing influx of illegal immigrant students or uninsured patients. That, says Camarota, has a much more potentially disastrous impact on citizens than any perceived national economic threat.

“I think what’s really important to emphasize is that the case against government benefits is a generalized case—not just applicable to illegals or any other class of people,” says Richard Michael, a California-based political activist. “Generally speaking, charity is one of those powers reserved by the people. Using forced taxation to take money from some and use it for the personal benefit of others is theft.”

To that end, Michael sees subsidies for illegal immigrants—like the low-cost insurance offered in California—merely as political footballs designed to marginalize and divide voters.

“Look, I can’t blame anyone for taking advantage of the rules, whatever they may be. If illegal immigrants can get certain benefits legally, why wouldn’t they? But to make this just about illegal immigrants is a red herring the government uses to get people riled up and angry,” says Michael. “It’s like Whac-A-Mole in the end. People create these problems. Then Americans get incensed about them and spend time and money trying to stop them. But you hit one and another pops up. None of it addresses the underlying problems.”

For Camarota, one of those problems is less about illegal immigration and more about the average education level of those who are here unlawfully.

According to the nonprofit Hasting’s Center, undocumented immigrants—on average—have a significantly lower education level than U.S. born residents. For undocumented immigrants between 25 and 64 years old, 47 percent haven’t completed high school (compared to just 8 percent of U.S. born adults of the same age). And more than half of these immigrants—29 percent of the total—have less than a ninth grade education (compared to just 2 percent of their U.S.-born counterparts).

“When thinking about the potential costs illegal immigrants create, it’s important to recognize why that is,” says Camarota. “It’s important because if you’re thinking, ‘Well, we can just legalize these folks and they’ll pay taxes,’ you’re not thinking it through. That may be true for some, but given their education profile, it’s just not reasonable to expect that they will pay enough taxes to cover their consumption of public services.”

The Heritage Foundation’s 2013 study also looks at the illegal immigrant subsidy problem in similar terms.

“Well-educated households tend to be net tax contributors: The taxes they pay exceed the direct and means-tested benefits, education, and population-based services they receive,” the report reads.

In 2010 for example, U.S. households headed by college-educated individuals, received, on average, $24,839 in government benefits while paying $54,089 in taxes. This means the average college-educated household generated a “fiscal surplus” of $29,250, which the government used to finance benefits for other households.

Conversely, households headed by individuals with no high school degree received, on average, $46,582 in government benefits but only paid $11,469 in taxes—a fiscal deficit of $35,113.

“In many ways this issue has nothing to do with illegal immigration and everything to do with education,” says Michael. “But the illegal immigration topic is what captures headlines, so that’s what gets all the attention and the passion.”

Further adding to the nuanced complexity of this topic, a 2013 study published in the journal Health Affairsfound that immigrant workers—particularly non-citizen immigrant workers—are actually helping to subsidize Medicare’s finances rather than drain them.

"Policies that reduce immigration would almost certainly weaken Medicare's financial health, while an increasing flow of immigrants might bolster its sustainability," wrote the study’s researchers from the City University of New York and Harvard Medical School.

The reason for this is—of course—a little complicated.

According to the study, immigrants (both legal and illegal) contributed $33 billion in 2009 to the Hospital Insurance Trust Fund, which pays for a large portion of Medicare’s Part A patient and elder care programs. Immigrant contribution accounted for 15 percent of the total, but they only received 8 percent of expenditures, providing the trust fund with a surplus of $14 billion.

Meanwhile, U.S. born citizens contributed $192 billion but received $223 billion in benefits—a drain on the trust fund of $31 billion.

The cause of this is twofold. For one thing, the study points out that there are 6.5 immigrants of working age for every one elderly immigrant. Comparatively, there are only 4.7 U.S.-born, working-age citizens for every one retiree. What’s more, the average expenditure for immigrant enrollees in Medicare was $3,923, but $5,388 for U.S.-born enrollees.

“This is an incredibly complex issue without a panacea, which is what most people look for,” says Camarota. “When we talk about subsidies what do we even mean? If an illegal immigrant drives on the highway, is that a subsidy? Illegal immigrants make up about 3 percent of the population, so does that mean 3 percent of road construction goes to illegal immigrants?”

Nonetheless, Camarota points out that it is important to attempt a resolution to some of these concerns but to also make sure “we are being honest with the public.”

“You don’t want to tell people that illegal immigration isn’t a financial problem, because that’s not the truth,” says Camarota. “But you also don’t want to tell them that simply legalizing illegal immigrants would solve the problem, because that’s not a good deal either. There are many layers to unpack and a lot more conversation to be had.”