Calculating the Impact of California’s Immigrants : Economy: Newcomers raise the state’s social services costs but also spur investment and pay plenty of taxes.

When Gov. Pete Wilson pointed to immigrants as one of the sources of the state’s budget troubles, he stepped into a political minefield.

Here was the governor, in a state that has romanticized, nurtured and invited immigration, wondering in a national newsmagazine whether there is “a limit to what we can absorb.” He referred to settlers from other states, as well as other nations, and to trends showing the number of Californians receiving tax-supported services growing faster than the ranks of those who pay taxes.

Although Wilson talked about the newcomers being a mixed blessing, bringing fresh energy and creativity to the state as well as a demand for expensive government services, his remarks generated a hot debate in California and were interpreted by some as anti-immigrant, a criticism the governor vigorously disputes.

Wilson’s pronouncements rekindled a complex, racially charged and polarized debate that has raged for years concerning the economic pros and cons of immigration. Similar themes are likely to resonate nationwide this election year, as lawmakers facing a ruinous recession grapple with the dislocations caused by the largest wave of immigrants since the turn of the century.

While crafting a cost-benefit ratio for immigration is an enterprise fraught with uncertainty--many statistics tossed about in the debate are inherently misleading--an examination of the relevant numbers by The Times suggests three broad conclusions.

* Immigrants and their offspring generate substantial costs--especially for education, health and child care--that place a severe strain on government, particularly at state and local levels.

* Immigrants contribute mightily to the economy, by paying billions annually in taxes; by filling low-wage jobs that help keep domestic industry competitive, and by spurring investment and job-creation, revitalizing once-decaying communities. Many social scientists conclude that the newcomers, rather than drain government treasuries, contribute overall far more than they utilize in services.

* Immigrant tax contributions are not directed commensurately to areas most affected by their presence. Thus, regions with large numbers of foreign-born settlers, such as California, tend not to receive their “fair share” of immigrant-generated tax money that is funneled to Washington. That spells little relief for the cities, counties, states and school districts where austerity-minded officials face rising costs associated with the population influx.

“While everything I write says that immigrants are net contributors from the point of view of the country as a whole, that’s not necessarily true from the point of view of state or city governments,” said Julian L. Simon, an economist at the University of Maryland and a leading advocate of the notion that immigrants spur economic growth. “There’s an imbalance here that clearly needs to be addressed.”

Nowhere is the imbalance more in evidence than in the Los Angeles area, one of the world’s great migratory magnets, where bustling ethnic commercial strips attest to the entrepreneurial verve and economic vibrancy of recent immigrants--mostly from Latin America and Asia.

In Los Angeles County, illegal immigrants--mostly from Mexico--generated almost $3 billion in assorted tax revenues during 1990-91, according to a county study that assumed an undocumented population of 770,000--a number some say is low. But the bulk of those funds--$1.7 billion--went to Washington in the form of income tax and Social Security levies, the study found.

Related county costs--mostly in health and child care, jails and other justice-type expenses associated with the immigrant population--exceeded $413 million, the study found. The county, however, only received about $137.6 million, about 4.6%, of the $3 billion in tax revenues generated by the immigrants.

Officials say children born to illegal immigrants now account for more than 65% of all births at county-run hospitals in Los Angeles County, costing taxpayers $28 million a year. Federal welfare payments to U.S.-born children of illegal immigrant parents living in the county approach $250 million annually, officials say. By law, illegal immigrants are barred from receiving federal welfare payments and a range of other entitlement benefits, including food stamps and unemployment compensation.

“Undocumented aliens and their children are clearly a problem for all levels of government, and our county resources . . . focus more and more on this problem,” Richard B. Dixon, the county’s chief executive officer, said in the report.

In San Diego County, meanwhile, the dynamics of the immigration phenomenon are somewhat different. The region serves less as a final destination and more as a conduit for hundreds of thousands of immigrants heading to the major job markets and expanding immigrant neighborhoods of Los Angeles, experts say.

Nonetheless, the U.S.-Mexico border and the presence of undocumented immigrants in San Diego and North County, particularly in rural squatters’ camps, have generated a similar debate about immigration’s impact. There has been no comprehensive study on the costs and benefits of immigration; studies so far have focused on different aspects of the issue, such as immigrants’ use of government services.

Last year, an advisory report by San Diego County’s Department of Transborder Affairs concluded that local governments have been “strained to the extreme” by legal and illegal immigration.

The study found that about 100,000 Latino immigrants were undergoing legalization under the 1986 “amnesty” law. This population helped account for a tripling of the number of schoolchildren who spoke a foreign language in county schools and a $7-million health budget shortfall attributed to the federal government’s failure to compensate the county for health care for newly eligible amnesty recipients.

The study noted that San Diego County “is 57th among California’s 58 counties in per capita state revenue allocations,” and concluded that a federal program established to help pay for the absorption of legalized amnesty recipients “has fallen short of its purpose.” Among the report’s recommendations was that local governments increase their lobbying for federal funding to offset the costs of immigration.

Two San Diego State University researchers are currently working on a study funded by the State Office of the Auditor General that officials describe as the most comprehensive, scientific look to date on the costs and benefits of illegal immigrants in the county.

The study--requested by Sen. William A. Craven (R-Oceanside), head of a State Senate committee on border issues--will attempt to determine the number of undocumented immigrants living in the county, their cost to government in services such as health care, criminal justice and schools, and their benefits in terms of tax payments and the job market, officials said. It is scheduled for completion in March.

Statewide, foreign-born residents account for about 25% of all recipients receiving assistance under the $5.6-billion-a-year Aid to Families with Dependent Children program, California’s largest welfare program. The overall tab is split 50-50 between state and federal governments. Legal, foreign-born immigrants make up about 20% of the state’s population of 30 million.

One of Wilson’s central complaints is that the federal government has reneged on a financial commitment to assist regions heavily affected by the recent wave of immigration.

The 1986 Immigration Reform and Control Act, which created an amnesty program that led to legal residency for 3 million foreigners (more than half of them California residents), earmarked $4 billion in future assistance for states likely to absorb the bulk of the newly legalized. The federal funds were designed to offset prospective increases in health care, schooling and other costs for the newly legalized.

However, the promised grants were slashed on Capitol Hill. California lost more than $600 million.

Government costs associated with the amnesty population continue to mount. The price of providing medical services to the newly legalized in California is expected to increase to more than $800 million during 1991-92, according to the state Health and Welfare Agency. Of that amount, at least $340 million will be for pregnancy services.

Despite the clear burden on local governments, proponents of immigration contend that the newcomers “put in far more than they take out,” in the words of Sen. Art Torres (D-Los Angeles), chairman of the Legislature’s Joint Committee on Refugee Resettlement, International Migration and Cooperative Development. He cites studies showing that 90% of the 1.6 million adults legalized under the general amnesty program work, and more than 80% hold down two jobs.

Wilson, in expressing alarm about state budget trends, cited a “white paper” released by the Department of Finance, which helps prepare the budget. The paper drew attention to emerging demographic changes that the governor finds troubling.

Census figures show that the state is getting younger, thanks in part to the influx of immigrants, who tend to be of a younger median age than the U.S.-born population.

During the 1980s, the state’s working-age population (ages 18-64)--which produces the most tax revenue--increased nearly twice as fast as the school-age population (ages 5-17). Based on the 1990 census, authors of the white paper said, the situation “will change dramatically in the 1990s,” with the school-age population “set to explode.” The result will be public school enrollments swelling at a rate much faster than the growth in the numbers of taxpayers being counted on to support public education.

In California, no one knows with any precision the number of foreign-born students attending public schools. Authorities estimate that perhaps 20% of all pupils are immigrants (about 1 million), based on the finding that about that many speak only limited English. With average annual education costs per youngster estimated at $5,000 statewide, the price tag for schooling these youths would amount to $5 billion annually.

Based on recent population trends, the white paper concluded that California’s population will grow by 6.3 million during the 1990s. More than half the growth, 55%, will come from natural growth (births); 44% will come from foreign immigration and 1% from other states. Looking back, the Finance Department estimated that about 75% of the immigrants to California during the 1980s were foreign-born.

By logging the soaring cost of social programs into a computer--along with rising population figures and declining federal support--and projecting them over the decade of the 1990s, analysts produced the basis for Wilson’s warning that government programs are exhausting the supply of tax money needed to pay for them.

Critics say the governor, by emphasizing the effects of immigration, has vastly oversimplified the issue of a dwindling taxpaying base, casting newcomers as the culprits when the issue is much more complex.

So sensitive is Wilson to the charge that he has been anti-immigrant that he recently drew reporters to a cold, wind-swept parking lot on the outskirts of Sacramento to praise a Mexican immigrant who came to California when he was 15 and built up a $3-million-a-year construction business. A few days later, Wilson told reporters: “It’s not a problem of immigrants. It’s a problem of poor people. We have received a great many immigrants who have substantially enriched this state.”

One factor in shrinking tax collections--along with the recession--is the billions in tax favors that have been handed out for more than a decade by a succession of governors, legislatures or the voters.

The tax bonanzas began with passage of Proposition 13, the property tax-slashing measure that spawned the “tax revolt” in 1978 and grew during the 1980s to include significant reductions in business and personal income taxes. By 1988-89, according to the legislative analyst’s office, the various tax cuts were costing state and local governments $27 billion annually. The more than $7 billion in tax increases passed last summer restored some of those funds, but only a relatively small portion.

During the 1950s and 1960s, before the wave of tax cuts, California had enough money to handle a much higher rate of net migration to the state than it faces today--and still have sufficient funds to build its freeways, water systems, public schools and universities.

In fact, the state’s population grew much faster from 1950 to 1970, up 85.5%, than it did from 1970 to 1990, up 49.6%. In actual numbers, not percentages, 251,000 more people migrated to California in 1943 than moved here in 1990. Illegal immigration was much higher in 1990, however.

“The difference is during that period we planned for growth,” said David Hayes Batista, who teaches at the UCLA Medical School and heads the Chicano Research Center. “Now, all of a sudden we are overcrowded.”

From his perspective, the problem is one of poor policy-making and planning. “We have simply refused to invest in ourselves. We lost our vision,” Batista said. “We know how to handle growth. We did it in the past. It is the political will that is lacking.”

Times staff writer Sebastian Rotella contributed to this story.