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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration (1998)

Chapter: 3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study

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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

3

Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study

Deborah L. Garvey and Thomas J. Espenshade

INTRODUCTION

Studies of the economic impacts of immigration on receiving countries have focused primarily on the labor market consequences of immigrants. For example, how are the wages and employment opportunities of native-born Americans affected by the growing presence of foreign workers in local area labor markets? Much of the available research has concentrated on identifying potential adverse impacts for native minority workers (including women, blacks, and Latinos) and quantifying the change in either native workers' wages or their employment prospects (Abowd and Freeman, 1991; Borjas and Freeman, 1992; Borjas, 1994). Considerably less effort has been expended by economists in estimating the fiscal impacts of immigrants or in evaluating how these effects compare with the governmental benefits received and taxes paid by the native-born population. Indeed, these issues are barely mentioned in two recent review papers by Friedberg and Hunt (1995a, 1995b).

Examining the impacts of immigrants from a budgetary perspective involves estimating their revenue contributions to federal, state, and local governments; estimating the benefits they receive from each level of government in return; and then determining the degree to which the two amounts differ at each jurisdictional level. If revenues provided by a household exceed government expenditures on that household, the household is considered to be a net fiscal asset or gain to other taxpayers. If, on the other hand, fiscal costs exceed the revenues generated by a household, then it is a net fiscal burden or drain on remaining taxpayers (Rothman and Espenshade, 1992). Fiscal costs include transfer payments from means-tested entitlement programs, expenditures on elementary and secondary

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

school education, and a range of government services that are provided to all residents regardless of age or need (for example, trash collection, public roads, and police and fire protection). Fiscal revenues include an assortment of tax payments, fees and licenses, and voluntary contributions made to governments by households. In recent years, knowledge of the fiscal impacts of immigrant households has taken on additional policy significance as numerous states have sued the federal government for the costs of services they are required by law to provide to resident illegal immigrants (Clark et al., 1994; U.S. General Accounting Office, 1994, 1995).1

Some studies of immigrants' fiscal impacts have been conducted by university researchers, but most have been prepared by analysts working for state or local governments.2 Census data suggest that immigrants were slightly less likely than natives in 1970 to receive cash welfare payments (for example, Aid to Families with Dependent Children and Supplemental Security Income), but that by 1990 immigrant households were overrepresented among the welfare population (Borjas, 1994). In 1990 the fraction of immigrant households receiving welfare was 9.1 percent versus 7.4 percent among native households. Tracking immigrant cohorts reveals that immigrants "assimilate into welfare" the longer they are in the United States. Using data from the 1984, 1985, 1990, and 1991 panels of the Survey of Income and Program Participation, Borjas and Hilton (1996) found little difference between natives and immigrants in the probability of receiving cash welfare benefits, but a larger differential emerges when both cash and noncash means-tested programs are analyzed. For example, the fraction of immigrant households that receive some kind of public assistance is 21 percent compares with 14 percent among natives.

Part of the increase in the fraction of immigrant households receiving welfare is explained by growth in the refugee population. When refugees are excluded, Fix and Passel (1994) find that working-age migrants are less likely to receive welfare than their native-born counterparts, a conclusion that is consistent with Borjas's (1994) observation that households from Cambodia or Laos had a welfare participation rate in 1990 of almost 50 percent. Immigrants' legal status

1  

During 1994 Arizona, California, Florida, New Jersey, New York, and Texas filed suits in federal district courts to recover costs they claim they incurred because of the federal government's failure to enforce U.S. immigration policy, protect the nation's borders, and provide adequate resources for immigration emergencies (Dunlap and Morse, 1995). All six lawsuits sought compensation for the costs of imprisoning undocumented criminal aliens in state or local correctional facilities, and many included claims for public education, emergency health care, and other social services. The amounts involved ranged from $50 million in New Jersey for the 1993 costs of jailing 500 undocumented criminal felons and for future costs of new prison construction to more than $33 billion in the New York case which sought reimbursement of all state and county costs associated with illegal immigration between 1988 and 1993 (State and Local Coalition on Immigration, 1994). All six suits have been dismissed, but some states are appealing the decisions (Espenshade, 1996).

2  

For comprehensive reviews, see Rothman and Espenshade (1992) and Vernez and McCarthy (1995, 1996).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

also matters in other ways. Current illegal immigrants pay less in taxes than former undocumented migrants who received amnesty under the terms of the 1986 Immigration Reform and Control Act, who in turn pay less than permanent resident aliens. Members of the native-born population pay the highest taxes, but the authors of these findings point out that the differentials reflect differences in average income rather than anything intrinsic to immigration status (Vernez and McCarthy, 1995).

There is only limited evidence bearing on the question of immigrants' net fiscal implications. Fix and Passel (1994) conclude that immigrant households on average are substantial fiscal benefits to other U.S. taxpayers when all levels of government are considered simultaneously. But these effects are not distributed uniformly. Only at the federal level do immigrants appear to contribute more than they receive (Vernez and McCarthy, 1995). Revenues and expenditures associated with immigrants appear to be more or less offsetting for state governments, whereas it is typically at the level of local governments where the fiscal impacts of immigrants are most negative (Rothman and Espenshade, 1992). Evidence from the 1980 census for New Jersey suggests that both immigrant and native families are fiscal burdens for local governments and that the negative impact is greater for immigrants (Espenshade and King, 1994).

Existing studies usually exhibit some combination of three problems. First, they look selectively at particular expenditure or revenue items associated with immigrants, which means that it is impossible to draw conclusions about immigrants' net fiscal impacts.3 Second, only one previous study (Espenshade and King, 1994) makes use of available micro-level information about the demographic and economic circumstances of individual immigrant households that can be obtained routinely from decennial census data. Instead, researchers commonly employ a "top-down" or average cost strategy that amounts to allocating a simple pro rata share of government expenditures or revenues to each household. This approach ignores potentially important sources of household-level variation.4 For example, Clark et al. (1994) assume the same per capita school expenditure for all students in a given state, even though these expenditures vary substantially by school district. Incorporating place of residence into estimates of elementary and secondary school expenditures could make a significant difference to the results. Third, researchers often emphasize the fiscal impacts of the immigrant population and ignore taxes paid and benefits received by native households. This approach may cast immigrants in a prejudicial light by overlooking the fact that both immigrants and natives can be fiscal drains on state and local government budgets (Espenshade and King, 1994). Results for immigrants should be interpreted in the context of natives' impacts.

In addition, one challenge for all fiscal impact studies is to cast the analysis

3  

See, for example, Borjas and Trejo (1991) and Clark et al. (1994).

4  

See Huddle (1993) and Clark et al. (1994) as examples.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

in the context of a general equilibrium economic framework (Isbister, 1996). In contrast to simpler budgetary accounting approaches, general equilibrium models examine the lifetime interactions of natives and immigrants in the economy as workers, consumers, entrepreneurs, taxpayers, and recipients of government services. For example, educating immigrant children or providing them with sufficient health care to make learning possible may impose high short-run fiscal costs on local governments. However, as productive adults, these individuals are also potential net benefits to local governments as wage earners and as payers of sales and property taxes. Even in the short run, government expenditures flow as wages to teachers, health care workers, and other suppliers of goods or services to immigrant children. Moreover, if immigrants depress wage rates and reduce the employment opportunities of native workers, then there is an interaction between immigrants and the fiscal impacts of natives that is typically ignored in available research.

In this chapter we examine the fiscal impacts of immigrants from a micro perspective utilizing household-level information on New Jersey's population from the 1990 census. A comprehensive view is taken of state and local government revenues from and expenditures on noninstitutional households, which means that we are able to evaluate the net fiscal implications associated with immigrant families. Finally, we compare the budgetary consequences of households headed by native-born versus foreign-born individuals. Our results suggest that the typical New Jersey household, whether native or foreign born, uses more state and local government services than it pays for with taxes. Among nonelderly household heads, the negative fiscal impact of immigrant households exceeds that of native households by 46 percent at the state level and by 60 percent for county and municipal governments. In general, however, there is greater diversity within the foreign-born population, when stratified by region of origin, than there is between natives and immigrants.

CONCEPTUAL AND OTHER ISSUES

Attempts to estimate the fiscal impacts of immigrants encounter a variety of conceptual, methodological, and data issues. We do not claim to have resolved these issues definitively. Rather our purpose in this section is to describe the most critical ones as the basis for a subsequent discussion of the choices and assumptions we made in producing estimates for New Jersey.

Unit of Analysis

One issue involves the appropriate unit of analysis—whether it should be an individual, a family, or a household. There are reasons to prefer a household definition. First, many local government services such as fire and police protection are provided to households, and numerous taxes (such as property taxes) are

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

paid by households. Second, a household comes closer to approximating a functioning socioeconomic unit of mutual exchange and support than a family. Using the ''family" in the Census Bureau's sense of two or more individuals who are living together and who are related by blood, marriage, or adoption may be unnecessarily limiting for budgetary accounting purposes. Third, in most cases it makes little practical difference whether a family or household definition is used. In 1990 roughly 89 percent of the noninstitutional population in New Jersey lived in family households, approximately 8 percent lived alone, and just 3 percent lived in households with unrelated persons.

Households are usually labeled "immigrant" or "native" according to the householder's place of birth. But this practice encounters difficulty whenever some household members are foreign born and others are native born (Vernez and McCarthy, 1995). Immigrant-headed households may contain native-born children, and native-born householders may have a foreign-born spouse.

Marginal Versus Average Cost

Some services that governments provide have the characteristic of being pure or nearly pure public goods in the sense that consumption by one additional individual or household does not necessarily diminish the consumption of everyone else. National defense is the classic example at the federal level. Parks and other recreational facilities are illustrations of near-pure public goods at the state and local level. How should these expenditures be allocated to households? Some analysts argue that the appropriate cost to assign to an immigrant household for a public good is zero, because the marginal cost of servicing an additional household is negligible. There are two problems with this approach, however. One is the arbitrary manner of identifying the "last" household or households to benefit from the expenditure. A related difficulty pertains to threshold effects—that is, to assigning discrete jumps in marginal cost to particular households when population growth creates the need, for example, for a new school, road, or fire house.

An alternative perspective is that costs should be averaged over the general population if they cannot be earmarked to a well-defined subset of beneficiaries. This approach avoids the invidious comparisons inherent in marginal cost assignments, while recognizing that each household privately consumes a small portion of near-pure public goods. The issue is perhaps less important at the state level, because many services provided by the state arise from means-tested transfer programs in which recipient households are readily identifiable. At the county and municipal levels, however, a larger fraction of expenditures is not attributable directly to individual households. Net of education expenditures that benefit a student population, most of the goods provided by New Jersey's local governments are relatively public in nature (for example, parks and recreation, public health departments, public libraries, and judicial and legislative functions).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
Top-Down Versus Bottom-Up

Two general and competing methodologies for assigning governmental expenditures and revenues are the top-down and bottom-up strategies —also known as macro and micro procedures, respectively. In the top-down approach one begins with a global sum, derived from governmental balance sheets, and then devises rules to distribute that total among beneficiary or taxpayer households. An alternative procedure is to build up to the aggregate total by inspecting the benefits received and the taxes paid by each individual household in the population and then cumulating the results. In principle, both methods should give the same or nearly the same answer, not only in the aggregate but also in the distribution of benefits and costs across households. 5 In actual practice, however, a macro or top-down approach minimizes variation across households because analysts frequently assign each household a prorated share of total tax revenue and public expenditure on goods and services. This approach will be inappropriate whenever the goods or services in question are not public goods or if households exhibit substantial variation by demographic or socioeconomic characteristics. Most studies of immigrants' fiscal impacts have used a macro perspective (Rothman and Espenshade, 1992). Recent exceptions include work reported by Borjas (1994) and Espenshade and King (1994).

Immigrants' Legal Status

Another practical difficulty is the common inability to distinguish among immigrants by their legal status. Decennial census data and the monthly Current Population Survey (since January 1994) contain questions on place of birth, year of immigration, and citizenship status for the foreign-born population. Roughly two-thirds of New Jersey's foreign-born household heads are naturalized U.S. citizens, but it is impossible to tell with census data whether noncitizen householders are permanent legal residents, temporary residents, refugees, or illegal migrants. Previous studies have suggested that different categories of immigrants have differential patterns of benefit receipt and tax payments (Rothman and Espenshade, 1992; Fix and Passel, 1994; Vernez and McCarthy, 1995, 1996). This problem is attenuated in studies that use a micro-level approach to calculate household benefit receipts and tax payments, because differences in average benefits received and taxes paid are permitted to fall out of the estimation benefits received and taxes paid are permitted to fall out of the estimation and are not imposed by arbitrary rules that assign expenditures and revenues to house-

5  

There are obvious situations in which discrepancies would occur, however. Not all of the state sales tax collections come from New Jersey residents. Pennsylvania and New York residents who work or shop in New Jersey contribute to New Jersey's total sales tax revenues through their purchases. Moreover, out-of-state tourists visiting New Jersey contribute to sales tax receipts. A similar situation exists on the expenditure side. Public monies spent to build state roads provide benefits to out-of-state motorists as well as to New Jersey's residents.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

holds. Simply prorating government expenditures and revenues across households blurs the distinctions between native- and foreign-born populations and between naturalized citizens and resident aliens. The ability to distinguish the legal status of immigrants is also relevant to policy, given recent changes to welfare laws.

Who benefits and Who pays?

There are also questions regarding the proper attribution of tax revenues received by state and local governments. First, the problem of tax incidence has been largely ignored in the demographic literature. However tax incidence—that is, who really bears the burden of a given tax levy—has generated considerable research in public finance (Pechman, 1985; Fullerton and Rodgers, 1993; Metcalf, 1993). Previous studies of the fiscal impacts of immigrants have assumed that the statutory payer of a tax bears the full incidence. Second, similar incidence questions arise on the benefits side. Who are the beneficiaries of local public school expenditures? The proximate beneficiaries of public education expenditures are the students, but an important rationale for public funding of elementary and secondary schooling is that society as a whole is better off in the long run with a more educated population. Third, the household sector is not the sole beneficiary of state and local government expenditures. The corporate sector benefits when, for example, an improved transportation or communication system permits a company to function more efficiently, or when a more educated work force makes a business more productive. The fourth question concerns the proper allocation of the costs of capital construction projects. Unlike a government's current expenditures on goods and services that are consumed in a single period, capital investments (for example, roads, schools, water treatment plants) generate a stream of services over time. For these items it is not obvious how to identify the population of beneficiaries. Should it be the residents of a jurisdiction when construction is completed? Should it include residents when the debt is retired? What about future residents who will enjoy the benefits years after the initial capital outlays have been obligated? These could include as-yet-unborn children and future in-migrants from other states or localities.

Data

Numerous data sets from federal, state, and local sources were combined to produce the estimates described in this chapter. The principal source of information is the 5 percent public use micro-data sample (PUMS) for New Jersey from the 1990 Census of Population and Housing conducted by the Bureau of the Census. This file contains detailed information on the demographic and socioeconomic characteristics (as of April 1, 1990) of approximately 145,000 randomly selected New Jersey households. We exclude from our analysis residents

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

of institutional and noninstitutional group quarters, who constitute less than 2 percent of New Jersey's total population. Income data for household members pertain to the 1989 calendar year.

Census data were extensively supplemented with state and local government budget information. The major source of additional information at the state level was the State of New Jersey Budget: Fiscal Year 1991–1992 (State of New Jersey, 1991b). This document contains actual state program expenditures during the 1990 fiscal year (ending June 30, 1990) as well as explanations of program participation parameters and eligibility criteria. When these data were inadequate to identify the relevant beneficiary populations, we obtained additional information and program data from individual departments in the executive branch of the state government and from independent research organizations. For example, information about municipal aid distributions came from State Aid Programs for Municipalities, 1989 and 1990 (Forsberg, 1995). Data on the state's share of school district expenditures were derived from the 1990 New Jersey Legislative District Data Book (Rutgers, the State University of New Jersey, 1990). The principal supplementary sources of information at the local level were detailed municipal and county budget and tax data found in the Fifty-Second Annual Report of the Division of Local Government Services, 1989 (State of New Jersey, 1990c). Clarifications of definitions for revenue and expenditure categories were frequently provided by representatives of the respective state and local agencies. A full listing of all data sources used together with a detailed description of the methodology used to arrive at our estimates of fiscal impacts are contained in the Appendix.

A demographic profile of our study population is shown in Table 3-1. It is constructed by multiplying unweighted PUMS data by 20. There were almost three million households in New Jersey in 1990. More than 85 percent of these are headed by someone born in the United States. Among foreign-born households, those headed by individuals born in Europe or Canada are the most numerous and comprise nearly one-half of the foreign-born total. Immigrant households are significantly larger than native households, although there is considerable diversity within the foreign population. Households with a head from Europe or Canada are somewhat smaller than the typical native household, whereas households headed by non-natives from other regions of the world have significantly more members.

There are also striking differences in age composition. The relative concentrations of children versus the elderly suggest that immigrant households are on average substantially younger than native households. Once again, however, there are sharp contrast within the foreign population. Households headed by migrants from Europe or Canada are markedly older than their counterparts from other regions and have fewer minor children. On the other hand, households headed by Asian immigrants are the youngest on average, having the fewest elderly and the most children. Differences in the average age of household heads

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

TABLE 3-1 Demographic Profile of New Jersey Households, 1990

 

Foreign-born Households by Region of Origin

Characteristic (mean)

Total

Native Born

Foreign Born

Europe / Canada

Asia

Latin America

Other

Number of Households

2,897,560

2,505,400

392,160

182,460

77,100

111,200

21,400

Persons in Household

2.74

2.68

3.10*

2.62*

3.59*

3.51*

3.16*

Children <18 in Household

0.66

0.63

0.81*

0.52*

1.14*

1.02*

0.99*

School-Age Children in Householda

0.43

0.41

0.54*

0.38*

0.76*

0.65*

0.59*

In Public School

0.34

0.33

0.42*

0.30*

0.60*

0.49*

0.45*

LEP Children <18 in Householdb

0.03

0.01

0.11*

0.04*

0.19*

0.18*

0.10*

LEP Children in Bilingual Educationc

0.02

<0.01

0.08*

0.03*

0.13*

0.12*

0.07*

Persons 65+ in Household

0.36

0.36

0.35

0.56*

0.15*

0.19*

0.19*

Age of Household Head

50.03

50.03

50.01

57.74*

42.06*

43.98*

44.06*

% Male Household Head

68.36%

67.45

74.14*

70.53*

85.40*

71.80*

76.54*

* Indicates native and foreign-born means are significantly different at the 5% level.

a School-age children are defined as those aged 6 to 17, inclusive.

b Limited English proficient children are defined as those who speak a language other than English at home and who speak English "well," "not well," or ''not at all," as opposed to "very well."

c Defined as LEP children aged 6 to 17 inclusive, who are enrolled in public elementary and secondary schools.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

confirm these conclusions. In short, the picture that emerges reflects a relatively large proportion of foreign households, nearly half of which are headed by European immigrants. These migrants tended to come to the United States earlier in the twentieth century and now head households that are both smaller and older than the average. Immigrants from Asia and Latin America predominate among more recent migrant cohorts, and they are now heads of households that are larger and more youthful than even native households.

The average number of children under age 18 who are enrolled in public school is significantly greater for immigrant households, with the exception of those from Canada and Europe. These differentials reflect differences in the number of minor children, not in the propensity of immigrant families to use public education services. Conditional on having school-age children, immigrant-headed households are no more likely to enroll their children in public school than native-headed households. Because local governments spend a large proportion of their budgets on public schools, these demographic differences across households have important fiscal consequences. Just slightly more than one-fourth (26 percent) of the average number of minor children in foreign-born households are themselves foreign born (0.21 out of 0.81). This proportion ranges between 15 percent in households headed by persons born in Europe or Canada to 32 percent in Asian-headed households. Of the 0.21 average number of foreign-born children in the typical foreign household, 84 percent are 6-17 years old. And of these, nearly 80 percent are enrolled in public elementary or secondary school. In other words, foreign- and native-born children have similar school attendance patterns, regardless of the nativity status of the native children's parents. Finally, there is remarkable uniformity in public school enrollment rates among foreign-born children when households are stratified by region of origin.

Socioeconomic variations by household type are shown in Table 3-2. Immigrant households from outside Europe and Canada have significantly above-average numbers of earners when compared with natives. This is partly a reflection of their greater size and youthfulness. Not only are households headed by Latin American immigrants significantly poorer than native households, they are also more likely to receive public assistance income than any other group of households. European and Asian immigrants are less likely to rely on public assistance than natives. On average, foreign-born households in 1989 had incomes that were about 6 percent below those for natives. However, income differences within the immigrant population are significantly greater than they are between natives and foreigners. Mean household income for Asian migrants, for example, is 56 percent higher than the average income for Latin American immigrants.

A simple measure of relative economic well-being can be obtained by calculating per capita income for each household and averaging across all households in a category. For the total population, per capita household income equals more than $20,900. It is approximately $21,500 for natives versus $17,600 for immi-

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

TABLE 3-2 Socioeconomic Profile of New Jersey Households, 1990

 

Foreign-born Households by Region of Origin

Characteristic Total

Born

Native Born

Foreign Canada

Europe / Asia

America

Latin Other

Mean Number of Wage Earners in Household

1.39

1.37

1.51*

1.22*

1.76*

1.78*

1.54*

% of Households Receiving Public Assistance Incomea

5.31%

5.24

5.79*

4.19*

4.46*

9.37*

5.70

% of Households Receiving SSI

1.66%

1.62

1.91

2.07*

0.96*

2.45*

1.21

% of Households Receiving AFDC

2.58%

2.57

2.63

1.01*

3.04

4.93*

2.99

Mean Public Assistance Income of Recipient Households, 1989

$4,428

4,459

4,250

4,502

4,163

4,135

3,905

Median Public Assistance Income of Recipient Households, 1989

$3,900

3,926

3,775

3,870

3,600

3,864

3,612

Mean Household Income, 1989

$50,684

51,085

48,122*

46,886*

62,836*

40,279*

46,404*

Per Capitab

$20,946

21,477

17,557*

19,335*

19,941*

13,144*

16,747*

Median Household Income, 1989

$41,929

42,110

39,000

37,200

54,180

34,000

37,000

a Public assistance income includes General Assistance, Supplemental Security Income, and Aid to Families with Dependent Children.

b Found by calculating per capita income for each household and averaging over all households in the category.

* Indicates native and foreign-born means are significantly different at the 5% level.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

grants. But among foreign-born households, this measure ranges between $13,100 for Latinos to nearly $20,000 for households from Europe, Canada, and Asia. It is apparent that Latin American migrants are typically among the poorest of all immigrant households in New Jersey. As we will see below, this finding, too, has implications for fiscal impacts.

RESULTS

We present our results in terms of averages per household after stratifying households by type. Households are grouped according to characteristics of the household head, including age and sex, nativity status (that is, whether foreign or native born), and region of birth for immigrants. Using decennial census data, we are unable to identify legal administrative status among noncitizen immigrant households.

State Estimates

The main results at the state level are displayed in Table 3-3. The table's first panel shows state expenditures on households in FY 1989–1990. General state services and state aid along with costs for public elementary and secondary school education are the largest items in dollar terms. General state services are the same for all households because they are prorated using average cost principles. There are sharp differences in education expenditures according to the age of the householder, because there are relatively few school-age children in households headed by senior citizens.

Total estimated state expenditures are summed across the bottom row of the first panel. They show that the state spent an average of approximately $3,700 on each household with a head under age 65 and more than $2,300 on elderly households. This age difference is preserved among different types of households and primarily reflects the gap in educational expenditures between younger and older households. In general, immigrants are more costly to the state than natives. Immigrant households with younger heads received roughly $400 more benefits than natives in 1989–1990. Among older households, the immigrant advantage was closer to $200.

Differentials between immigrants and natives are small, however, in comparison with the variation in state expenditures among the foreign-born population. European households commanded relatively fewer state expenditures, whereas Asian, Latin American, and other immigrants received state benefits well in excess of the foreign-born average. Latin American households are especially costly to the state. They received public benefits almost $900 or 25 percent greater than amounts going to the typical younger New Jersey household. Elderly Latino households had more than an $1,800, or nearly 80 percent, advantage. Higher than usual expenditures on education and especially on Medicaid and welfare explain most of the

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

TABLE 3-3 Average State Expenditures, Revenues, and Net Fiscal Impact per Household, by Age and Nativity Status of Head, FY 1989–1990 (all figures in dollars)

 

Total

Native Born

Foreign Born

State Expendituresa

<65

65+

<65

65+

<65

65+

General State Services/ State Aid

1,119

1,119

1,119

1,119

1,119

1,119

Elementary & Secondary Education

1,523

124

1,489

127

1,733

101

Higher Education

382

74

365

70

490

103

Medicaid

289

410

288

394

297

521

AFDC/GA/SSI

79

70

79

67

78

86

PAAD

14

143

13

138

19

176

Municipal Aid Programs

84

85

76

82

137

107

Employment & Training Programs

25

15

26

15

20

12

Programs for Aged, Vets & Disabled

25

91

27

94

10

72

Property Tax Reimbursement

101

124

102

125

94

119

Other Allocable Expenditures

52

70

52

69

48

74

TOTAL

3,693

2,324

3,636

2,300

4,044

2,489

State Revenues

Income Tax

1,375

411

1,389

410

1,291

417

Sales Tax

504

317

508

319

484

301

Auto/Fuels Tax

249

156

252

159

227

133

Alcohol/Tobacco Tax

121

102

119

101

134

105

Inheritance Tax

68

74

74

75

29

68

Business Property Tax

6

3

5

3

7

3

Realty Transfer Tax

41

7

40

7

48

9

TOTAL

2,364

1,070

2,387

1,075

2,220

1,036

Net Fiscal Impacth

-1,329

-1,254b

-1,249

-1,225

-1,824c

-1,453g

a See text for explanation of expenditure and revenue categories.

b Under 65 and 65+ mean deficits are significantly different at the 5% level.

c Native and foreign-born mean deficits differ significantly for household heads under 65.

d Native and foreign-born mean deficits differ significantly for household heads 65 and older.

e Foreign-born household heads under 65 from Europe and Canada have significantly smaller mean deficits than their counterparts from other regions.

f Foreign-born household heads 65 and older from Europe and Canada have significantly smaller mean deficits than those from Latin America.

g Both b and d, see above.

h Calculated as revenues minus expenditures.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Foreign-born Households by Region of Origin

Europe/Canada

Asia

Latin America

Other

<65

65+

<65

65+

<65

65+

<65

65+

1,119

1,119

1,119

1,119

1,119

1,119

1,119

1,119

1,466

46

1,808

295

1,971

416

1,767

78

410

88

622

200

481

180

504

90

180

365

245

733

468

1453

291

723

42

57

66

138

125

255

88

113

17

167

21

166

21

243

16

174

87

86

80

110

229

239

163

134

27

10

10

26

19

19

18

16

15

76

6

69

7

49

7

70

106

123

90

107

85

91

88

110

52

72

48

76

45

89

41

77

3,520

2,208

4,115

3,037

4,569

4,153

4,102

2,705

1,419

396

1,620

792

934

417

1,145

517

512

296

549

403

412

296

449

323

261

133

244

183

185

114

198

141

129

99

137

143

139

128

123

105

46

73

14

42

22

48

17

59

8

3

8

4

5

2

5

4

45

8

77

35

28

6

51

18

2,419

1,008

2,648

1,602

1,725

1,011

1,988

1,166

-1,101

-1,199

-1,467

-1,435

-2,844e

-3,142

-2,114e

-1,539

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Latin American differential. As shown in Table 3-2, Latin American migrants' greater reliance on Medicaid and welfare is related to their poverty status. Education, including higher education, along with Medicaid costs help to explain the relatively higher amounts spent on Asian immigrants. Both education and Medicaid were comparatively less important for immigrants from Europe and Canada. Fewer school-age children largely accounts for lower educational expenditures on European and Canadian households.

Revenues that the state received from New Jersey households are shown in the lower panel of Table 3-3. The most important of these are income taxes, followed by sales and then automobile and gasoline taxes. Younger households paid a larger average amount in total taxes in FY 1989–1990 than senior households (roughly $2,400 versus $1,100), principally because labor force participation rates and income levels are higher for younger persons. Differences between immigrants and natives are once again small; total taxes paid by immigrant households averaged no more than 4–7 percent less than natives' tax contributions to the state. However, there is substantial diversity within the immigrant community. Compared with the statewide average for younger households, for example, total tax payments ranged between 12 percent above average for younger households headed by Asian immigrants to 27 percent below the statewide average for younger Latin American households. Much of the gap between younger Asians and Latinos is explained by differences in income taxes, which in turn reflect underlying differences in household income that were described in Table 3-2.

Households' net fiscal impacts are shown in the last row of Table 3-3. They are calculated by subtracting estimated per household state expenditures from state revenues. Our estimates suggest that every household type was a net burden on state government in FY 1989–1990, receiving more in state services than they paid for with state taxes. The typical budgetary deficit amounted to approximately $1,300 for each household in New Jersey. Some readers may wonder how this result is possible when the state's budget must balance every year. It arises because we have neglected other sources of revenue from corporations and the federal government that flow into the state's treasury and also because we have attributed as benefits to households some state expenditures that benefit the corporate sector.6

6  

An alternative approach that was used by Michael Clune in his California study is to assume that corporations (and tourists) receive public services equal in dollar value to the taxes they pay. With this added assumption, the net fiscal impact of the average household is zero. The typical household is neither a fiscal asset nor a fiscal burden. When this additional assumption is applied to the New Jersey results and the estimates are updated to reflect December 1996 prices, they suggest that the average native household generated an annual fiscal surplus of $232 (after combining local and state governments) and that the typical foreign household was a net burden of $1,484. By contrast, the corresponding estimates for California are an annual net surplus of $1,178 for natives and an annual net deficit of $3,463 for foreign households. Native and foreign households in New Jersey are more alike than they are in California in terms of family size, family composition, and household income. This fact helps to account for the smaller gap in New Jersey between the fiscal impacts of immigrant and native households (Smith and Edmonston, 1997:Tables 3-1 to 3-3.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

There is a small difference in the general population between younger and older households' fiscal effects. Significantly larger gaps emerge between immigrants and natives. Among younger households, the fiscal burden associated with immigrants is $575 or 46 percent greater than for natives. Elderly foreign households generate a smaller discrepancy ($228) but one that is nevertheless 19 percent higher than the comparable figure for natives. Disparities in fiscal impacts are greater among immigrant groups than between immigrant and native-born households. European and Asian immigrant families engender fiscal consequences that are not much different from all families. On the other hand, immigrants from Latin America and from other places are least likely to be paying their way. The estimated net fiscal deficit for Latinos is well over twice as large as it is for the typical household in the state, and younger migrant families from other countries impose a fiscal burden 60 percent greater than all younger families combined. These results are consistent with findings from earlier studies (Espenshade and King, 1994).7

We used regression analysis to test whether differences in fiscal impacts result from something intrinsic to nativity status or simply reflect differences in socioeconomic and demographic characteristics between immigrants and natives. After controlling for age, education, marital status, English proficiency, place of residence, and number of children, we found that the difference in net fiscal impacts associated with nativity status was not statistically significant.8 Our results suggest that it is not the fact of being foreign born per se, but rather the different configuration of immigrants' household characteristics that influences their net fiscal impacts on state government. Latin American and other immigrants, who are younger and have more children (and therefore incur greater state costs for elementary and secondary schooling), exert a larger fiscal imposition

7  

Using household-level information on the nativity status of children enrolled in public school, we can disaggregate state expenditures on public elementary and secondary school for immigrant-headed households into those for native- and foreign-born children (see the second row in the top panel of Table 3-3). The average household state expenditure on native-born children in households headed by migrants from Europe and Canada is $1,142 and $44 in younger versus older households, respectively. The corresponding figures are $1,043 and $182 in Asian households, $1,161 and $269 in Latino households, and $1,089 and $44 in other immigrant households. Recalculating net fiscal impacts of immigrant households by counting only educational expenditures on foreign-born children has a dramatic effect on the results in younger households. The deficit is reduced by 71 percent for Asian households, by 40 percent for Latin American households, and by slightly more than one-half for other immigrant households. For younger European and Canadian families, disregarding native-born children converts a per household fiscal deficit of $1,101 into a small surplus. However, focusing exclusively on foreign-born children in immigrant households encounters several problems. The native-born children are still someone's responsibility, and it can be argued that they are the responsibility of their immigrant parents. Moreover, disaggregating fiscal impacts at the level of individual children runs counter to our overall analysis which takes the household —not the individual—as the appropriate unit of analysis.

8  

However, when the immigrant-native differential is captured by modeling each region of origin separately, the coefficient on Latin America is still significant.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

than their native-born counterparts. Asian immigrants also have large families, but their disproportionate use of state education benefits is largely offset by higher incomes and tax payments.

The household-level net fiscal deficits are cumulated up to the state level and shown separately for male- and female-headed households in Table 3-4. The household sector ran a combined $3.8 billion deficit in FY 1989–1990. Immigrant households contributed $683 million to this total. Even though immigrants comprised 13.5 percent of all New Jersey households, they accounted for 18 percent of the aggregate budget gap. Latino households were just 3.8 percent of all households in the state, but they contributed 8.4 percent of the aggregate deficit. Within the foreign-born population, Latinos made up 28 percent of all households, whereas they accounted for nearly half (47 percent) of the fiscal deficit attributable to migrants. The average net fiscal deficit associated with female-headed households is significantly larger than its male counterpart. The relative gap between the sexes is especially pronounced for younger households.

TABLE 3-4 Net Fiscal Impact of Households on State of New Jersey, by Age, Sex, and Nativity Status of Household Head, FY 1989–1990 (all figures in dollars)

 

Total NJ Households

Native Born

Foreign Born

Net Fiscal Impact

<65

65+

<65

65+

<65

65+

All Households

State Total (millions)

-2,943

-856

-2,384

-732

-559

-124

Per Household

-1,329

-1,254

-1,249

-1,225

-1,824

-1,453

Per Capitag

-322

-874a

-302

-853a

-450

-1,022a

Male-Headed Households

State Total (millions)

-1,421

-349

-1,035

-295

-386

-54

Per Household

-884d

-937d

-758d

-911d

-1,591d

-1,113d

Per Capitag

-132d

-504d

-97d

-488d

-330d

-608d

Female-Headed Households

State Total (millions)

-1,522

-507

-1,348

-437

-174

-70

Per Household

-2,509

-1,635

-2,486

-1,599

-2,706

-1,897

Per Capitag

-827

-1,319

-818

-1,286

-902

-1,561

a Per capita mean deficit differs significantly (at 5% level) by age of household head.

b Foreign-born household heads under 65 from Europe and Canada have significantly different mean deficits from their counterparts in other regions.

c Foreign-born household heads 65 and older from Europe and Canada have significantly different mean deficits from their counterparts in other regions.

d Male-headed household mean deficit is significantly smaller than corresponding female-headed household mean deficit.

e Both b and d, see above.

f Both c and d, see above.

g Found by first calculating the net fiscal impact per capita for each household and then averaging over all households in the category.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

This finding is hardly surprising. Women earn less than men on average and usually have custody of children that result from nonmarital births and parental divorces, making female-headed households eligible for AFDC and Medicaid.

Local Estimates

Table 3-5 contains estimates of local government expenditures on households and of household-level taxes that flow back to counties and municipalities. General county and municipal expenditures consist of such items as general government, judiciary, public safety, public works, health and welfare (excluding expenses for county welfare boards and for welfare/public assistance), recreation and conservation, nonschool education (for example, public libraries), public employee benefits and pension contributions, and debt service. These costs are apportioned evenly to all households in a given political jurisdiction. We assume that, if immigrant and native households are located in the same neighborhood,

Foreign-born Households by Region of Origin

Europe/ Canada

Asia

Latin America

Other

<65

65+

<65

65+

<65

65+

<65

65+

-124

-83

-108

-5

-287

-33

-40

-4

-1,101

-1,199

-1,467

-1,435

-2,844

-3,142

-2,114

-1,539

-250

-908

-312b

-720

-752b

-1,842c

-574b

-1,176

-93

-34

-93

-3

-173

-15

-27

-1

-1,022d

-896d

-1,470b

-1,199

-2,361e

-2,386f

-1,772e

-993d

-166d

-542d

-295e

-507d

-546e

-1,042f

-410e

-584d

-32

-49

-15

-2

-113

-17

-13

-2

-1,421

-1,568

-1,450

-2,114

-4,132b

-4,393c

-3,412b

-2,246c

-586

-1,354

-415b

-1,333

-1,303b

-3,166c

-1,199b

-1,942c

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

TABLE 3-5 Average Local Expenditures, Revenues, and Net Fiscal Impact per Household, by Age and Nativity Status of Head, FY 1989–1990 (all figures in dollars)

 

Total

Native Born

Foreign Born

<65

65+

<65

65+

<65

65+

Local Expendituresa

General County

716

731

708

728

768

755

General Municipal

1,427

1,458

1,382

1,441

1,707

1,576

Elementary & Secondary Educ

2,134

154

2,034

154

2,754

156

County College

49

9

48

9

56

13

AFDC

17

4

17

4

16

4

TOTAL

4,344

2,356

4,190

2,335

5,302

2,503

Local Revenues

Property Tax

2,472

2,162

2,448

2,150

2,619

2,247

Utility Tax

160

142

161

142

157

139

TOTAL

2,632

2,304

2,609

2,292

2,776

2,386

Net Fiscal Impacth

-1,712

-52b

-1,581

-43b

-2,526c

-117g

a See text for explanation of expenditure and revenue categories.

b Under 65 and 65+ mean deficits are significantly different at the 5% level.

c Native and foreign-born mean deficits differ significantly for household heads under 65.

d Native and foreign-born mean deficits differ significantly for household heads 65+.

e Foreign-born household heads under 65 from Europe and Canada have significantly lower mean deficits than their counterparts from other regions.

they receive the same level of government benefits from general county and municipal expenditures. Therefore, differences in these costs by household type in the first two rows of Table 3-5 reflect variations in the spatial distribution throughout New Jersey of the respective populations.

Households' estimated net fiscal impacts at the local level are shown in the last row of Table 3-5. The net fiscal cost is either negligible or very small for senior citizen households. Elderly immigrants from Europe and Canada even appear to generate a slight surplus for other taxpayers, although the amount ($63) is not statistically different from zero. The one exception is Latin American households. Elderly Latino immigrant households incurred a local deficit of almost $1,400 per household in FY 1989–1990, principally because they paid below-average amounts in property taxes and lived in urban areas in the northeastern part of New Jersey that spent relatively large sums on general municipal functions.

The typical nonelderly household received benefits from local government that exceeded taxes paid by more than $1,700. This amount is larger than the

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Foreign-born Households by Region of Origin

Europe/Canada

Asia

Latin America

Other

<65

65+

<65

65+

<65

65+

<65

65+

Local Expendituresa

752

744

741

778

803

813

785

767

1,582

1,506

1,559

1,681

1,926

1,979

1,868

1,736

2,526

89

3,672

368

2,370

546

2,581

116

55

11

52

15

61

23

56

14

7

1

16

13

26

19

20

0

4,922

2,351

6,039

2,855

5,187

3,380

5,311

2,633

2,949

2,276

2,831

2,706

2,126

1,867

2,447

2,432

164

139

156

159

152

135

150

145

3,113

2,415

2,987

2,865

2,278

2,002

2,597

2,577

-1,809

63

-3,053e

10

-2,909e

-1,378f

-2,714e

-56

f Foreign-born household heads 65+ from Europe and Canada have a significantly lower mean deficit than those from Latin America.

g Both b and d, see above.

h Calculated as revenues minus expenditures.

fiscal burden these same households placed on state government in 1989–1990.9 There is a substantial nativity differential at the local level. The deficit imposed by immigrant households exceeds the one for natives by nearly $1,000 per household, or by 60 percent. This comparison hides even larger variations when migrants are disaggregated by region of origin. European migrants have fiscal costs that are relatively close to those of natives. But the fiscal impacts associated with younger immigrants from outside Europe and Canada are between 72 and 93 percent greater than those for their native counterparts. Given our findings at the state level, budget gaps this large might be expected for Latin American and other immigrants. But the fiscal deficit for Asian households (nearly $3,100) requires comment. Asian families have the highest average number of

9  

A deficit of this magnitude arises because we have attributed general county and municipal expenditures entirely to the household sector and because we have neglected nonhousehold sources of revenue to local governments. The latter include real estate taxes paid on commercial and industrial property, public utility taxes paid by businesses, and federal revenue sharing.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

school-age children, and they live in school districts that spend relatively large amounts per student. The disproportionately large public school expenditure on Asian children is only partially offset by the higher-than-average property taxes paid by younger Asian families. Parallel to findings at the state level, a regression analysis using a household's net fiscal impact as the dependent variable shows that nativity status is not a statistically significant predictor when household socioeconomic and demographic factors are controlled. Latin American immigrants again are the single exception.10

Table 3-6 shows that the combined household sector deficit at the local level was $3.83 billion in 1989–1990, approximately the same size as the aggregate deficit households imposed on state government. In contrast to the state picture, however, virtually all of the local fiscal deficit is attributable to younger households. Immigrant families are again responsible for a disproportionate share. Their fraction of the local deficit (20.5 percent) is half again as large as their portion of total households (13.5 percent). Among the immigrant population, European households' net use of local services is relatively small. Europeans and Canadians account for one-fourth of the aggregate local immigrant deficit but make up nearly half of all foreign households. Male-female differences are generally consistent with those at the state level in the sense that net fiscal deficits attributable to female-headed households are typically significantly greater than those for male-headed households. On the other hand, with the exception of Latinos, male-headed senior citizen households are net fiscal assets at the local level and might be expected to provide a small subsidy to other taxpayers.

CONCLUSIONS

This chapter uses data from 1990 census 5 percent PUMS files, supplemented extensively with information from state and municipal budgets, to estimate the state and local fiscal impacts of immigrant and native-born households in New Jersey. We take the household as the unit of analysis and pass each of the approximately 145,000 New Jersey households on the PUMS files under a microscope to estimate taxes paid to state and local governments and benefits received from the same jurisdictions. We do not claim that our methodology represents

10  

Once again, netting out public elementary and secondary school expenditures on native children in foreign-born households drastically reduces the implied fiscal deficit. The absolute amounts in question, on a per household basis, are $1,968 and $85 for younger and older, respectively, European and Canadian households; $2,119 and $227 for Asian households; $1,396 and $353 for Latin American households; and $1,591 and $65 in other immigrant families. In general, ignoring local educational expenditures on native children in foreign households has a stronger fiscal impact than a similar calculation at the state level.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

''best" practice, but it is substantially better practice than many approaches taken in the past.

There are several new features of these estimates. First, they are based on a micro-level analysis instead of a top-down macro procedure that prorates government revenues and expenditures evenly across households on the basis of average cost assumptions. We attribute roughly two-thirds of FY 1989–1990 current state expenditures on the noninstitutionalized population to targeted households that actually benefit from the expenditure. Just one-third of state expenditures are allocated on a pro rata share basis, and these are typically costs for public goods. Second, we attach fiscal cost and benefit data to each household record, and these micro units can then be compared in different ways. We contrast the fiscal impacts of households headed by immigrants and natives. Differences by age and sex of household head and by region of origin for the foreign-born population are also featured in the analysis. Third, we view government expenditures on households and revenues provided by the household sector to the state and to municipalities in the broadest terms possible, which means that we are able to draw conclusions about the net fiscal impacts of different kinds of households.

We find that both immigrant and native households are net fiscal burdens on state and local government in New Jersey, receiving more in services than they pay in taxes. Part of the shortfall is made up from a variety of taxes paid by corporations and part by monies passed back from the federal government. There is typically greater variation in fiscal impacts within the foreign-born population than between immigrants and natives. Immigrant households on average have significantly larger fiscal deficits associated with them than native households at both the state and local level. Moreover, the relative burden imposed by immigrants is greater for county and municipal governments than for the state. This conclusion is consistent with research from other states showing that it is usually local governments that shoulder the most substantial burden in providing services to immigrant families (Rothman and Espenshade, 1992). It would be useful for comparative purposes to move beyond New Jersey and to apply these micro-analytic methodologies to data from other states with large immigrant populations. Because no state is necessarily representative of the entire United States, developing additional case studies would provide a richer and more comprehensive national picture of the state and local fiscal impacts of U.S. immigration.

Our study challenges future research in four ways. First, the nonhousehold sector needs to be brought into the analysis on both the revenue and expenditure side. We have ignored taxes paid by corporations and have interpreted most government expenditures as benefits to households, which helps to produce the conclusion that households on average receive more services than they pay for. Second, the methodology of fiscal accounting needs to move beyond single-period static analysis toward examining individuals' and households' use of public benefits and payment of taxes in a dynamic life-cycle context. Separating out

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

TABLE 3-6 Net Fiscal Impact of Households on Local Governments, by Age, Sex, and Nativity Status of Household Head, FY 1989–1990 (all figures in dollars)

 

Total NJ Households

Native Born

Foreign Born

Net Fiscal Impact

<65

65+

<65

65+

<65

65+

All Households

State Total (millions)

-3,790

-36

-3,016

-26

-774

-10

Per Household

-1,712

-52

-1,581

-43

-2,526

-117

Per Capitae

-415

-79a

-383

-72a

-613

-133a

Male-Headed Households

State Total (millions)

-2,585

87

-1,970

80

-614

7

Per Household

-1,607d

234d

-1,443d

247d

-2,535

146d

Per Capitae

-336d

108d

-293d

115d

-574d

62d

Female-Headed Households

State Total (millions)

-1,206

-123

-1,045

-106

-160

-17

Per Household

-1,987

-396

-1,927

-387

-2,493

-459

Per Capitae

-625

-305

-608

-294

-761

-386

a Per capita mean deficit differs significantly (at 5% level) by age of household head.

b Foreign-born household heads under 65 from Europe and Canada have significantly different mean deficits from their counterparts in other regions.

c Foreign-born household heads 65+ from Europe and Canada have significantly different mean deficits from their counterparts in other regions.

age and cohort effects is impossible when the analysis is restricted to a single cross section. As a first step the methods we have developed in this chapter could be applied to successive cross sections. Age and cohort effects could then be deduced from the set of cross-sectional results. Third, second-round spillover and multiplier effects need to be accounted for in more complex, general equilibrium models. Immigrants' entrepreneurial activities may generate employment for other native and foreign workers. If immigrants have adverse labor market outcomes for native workers, these effects also need to be taken into account in computing fiscal impacts. Finally, estimating the fiscal impacts of immigrants is frequently a task assigned to in-house researchers working for state and local governments. These analysts are often laboring under tight budgetary and time constraints and may face incentives to reach a predetermined conclusion. An important challenge for future research is to engage the attention of academic economists, especially public finance specialists, in examining the fiscal implications of U.S. immigration.

APPENDIX

This methodological appendix provides a full listing of all data sources together with a detailed description of the methodology used in the simulation

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Foreign-born Households by Region of Origin

Europe/Canada

Asia

Latin America

Other

<65

65+

<65

65+

<65

65+

<65

65+

-204

4

-225

80.1

-293

-14

-51

-0.1

-1,809

63

-3,053

10

-2,909

-1,378

-2,714

-56

-386

-48

-693b

61

-781b

-751c

-763b

-159

-176

13

-202

0.5

-198

-7

-38

0.9

-1,940d

340d

-3,186d

211

-2,699d

-1,129d

-2,568d

656d

-396

134d

-702

155

-661d

-468d

-681d

372d

-29

-9

-23

-0.5

-95

-7

-13

-1

-1,281

-273

-2,242

-567

-3,469

-1,790

-3,270

-980

-347

-271

-637

-209

-1,101

-1,220

-1,074

-848

d Male-headed household mean differs significantly from the corresponding female-headed household mean.

e Found by first calculating the net fiscal impact per capita for each household and then averaging over all households in the category.

program to produce the fiscal estimates described above. Its purpose is twofold. First, the reader interested in the assumptions underlying the model will have a clearer understanding of the sensitivity of our estimates to those assumptions. Second, the model is rendered reproducible, not only with 1989–1990 fiscal data for New Jersey, but also in its application to other states' census and state and local government budget information. In the descriptions given below, household and individual-level variables from the 1990 Public Use Microdata Sample A (PUMS) are denoted in upper-case letters. The reader will notice in some calculations that one-twentieth of an aggregate budget figure is used. This reflects the fact that the PUMS is a 5 percent sample of New Jersey households. The results presented in the chapter are rescaled by a factor of 20 to accurately reflect households' budgetary impact in the aggregate.

Methodological Approach

We concentrate our analysis on the household sector comprising the resident noninstitutional population in New Jersey, and we take the individual household as our principal unit of analysis. The central problem is then one of attributing to households the expenditures made and the revenues received by state and local

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

governments during FY 1989–1990. To construct our estimates of fiscal impacts we adopt a micro-analytic perspective and examine each of the 145,000 households on the New Jersey PUMS file for 1990. We make four calculations for each household based on its demographic and socioeconomic makeup: (1) taxes paid to state government, (2) taxes paid to county and municipal governments, (2) benefits received from state government, and (4) benefits received from county and municipal governments. Each of these calculations is further disaggregated to reflect the composition of taxes paid and benefits received. These estimates are then appended to each household's record.

New Jersey's state budget for FY 1990 totaled $12.15 billion. Current expenditures made up $11.47 billion of this total. We exclude from consideration capital construction costs and the value of state bond redemptions because it is impossible to identify unambiguously the set of beneficiary households. Moreover, approximately $1.1 billion from current state expenditures was spent on goods and services that were not directly consumed by households. Roughly half of these costs are attributable to corrections and incarceration, whereas the remaining amounts were spent on the institutionalized disabled and handicapped population. We also exclude these expenditures on behalf of institutionalized populations, because we focus the analysis on the household sector. We are left with $10.38 billion in state expenditures to allocate to households.

We make simplifying assumptions about tax incidence that reflect the general consensus in the literature (Pechman, 1985; Rothman and Espenshade, 1992; Metcalf, 1993). We assume, for example, that the personal income tax is borne by the household paying the tax and that the sales and use tax is borne by consumers in proportion to their expected total expenditures. Purchasers of goods on which excise taxes are levied are presumed to bear the tax, and owners of personal business property and homeowners bear the burden of taxes assessed on these properties. Owners of residential rental properties, however, are assumed to pass local property taxes on to tenants. Equivalent assumptions are made about the incidence of public benefits; the proximate beneficiary is assumed to be the ultimate one. So, for example, we postulate that the benefits of public school expenditures lodge in households with school-age children who are enrolled in public schools and that there are no spillovers to the general population. Likewise, we neglect the possibility that government transfer payments or public expenditures on goods and services generate jobs and additional tax revenues when injected back into the economy. These multiplier effects could be accounted for in a general equilibrium model, but we do not consider them here.

Our study adopts a cross-sectional approach as a first step and implicitly ignores life-cycle costs and benefits of immigrants and natives. To our knowledge no fiscal impact analysis has been conducted with an explicit time dimension. Single-period accounting frameworks, although providing a useful guide to annual balance sheet impacts of immigrant and native households, cannot distinguish between cohort and aging effects. They cannot furnish evidence on how

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

patterns of benefit receipt and tax payments vary with immigrant tenure in the United States, nor do they yield information on differential net fiscal impacts across immigrant cohorts. On the other hand, our household-level estimates would permit separating cohort and age effects if we applied the same methodology to two consecutive censuses. 11

Another potential limitation of this study is our assumption that, apart from capital costs and institution-related expenditures, all governments' expenditures represent exclusive benefits to the household sector. But households are only one source of state revenues.12 Corporations also pay taxes; the most important of these in New Jersey are the corporation income tax, real estate taxes on commercial property, and fees and profits taxes on banks and insurance companies operating in the state. Neglecting corporate-sector taxes causes us to underestimate state revenues by at least 25 percent. The potential revenue understatement for local property taxes is perhaps greater and varies across municipalities by the proportion of valued property owned by businesses. To anticipate some of our later findings, these omissions help to explain why both native- and immigrant-headed households are net fiscal drains at the state and local levels. They also suggest the use of caution in interpreting the results. It might be best if readers viewed the fiscal impact estimates in relative instead of absolute terms; that is, estimates for natives can be compared with immigrants at each level of government.

Illustrative Examples

Three different estimation strategies are used to produce our estimates of fiscal impacts. First, government expenditures on pure or near-pure public goods and on those in which it is otherwise difficult to identify an appropriate subset of beneficiaries are allocated to households on an average cost or prorated share basis.13 For state expenditures the proration pertains to all households in New Jersey. For county and municipal expenditures the relevant geographic unit is the

11  

See Borjas (1985) for an example applied to immigrants' wage mobility between 1970 and 1980, and Garvey (1997), who applies the same methodology to New Jersey's immigrant and native population.

12  

Taxes paid by households constituted approximately 75 percent of total state tax revenue in FY 1990. The principal taxes included the gross income tax, sales and use tax, motor vehicle fees and the motor fuels tax, cigarette tax, the inheritance/estate transfer tax, business personal property tax, and the realty transfer tax.

13

In calculations where we allocate gene5ral expenditures on the assumption of average use, we count all households, not just noninstitutional households, as the set of beneficiaries over which we prorate costs. Institutionalized persons include inmates of correctional institutions, nursing homes, and psychiatric hospitals, as well as persons in group quarters, such as residents of rooming houses, group homes, college dormitories, or homeless shelters (Bureau of the Census, 1993:B-9). This is a correct empirical approach, because general expenditures on near-pure public goods benefit all residents, regardless of institutional status.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Census Bureau's Public Use Microdata Area (PUMA), which is the smallest area that is identifiable with PUMS data. A PUMA is typically smaller than a county; New Jersey has 21 counties and 56 PUMAs. Populous counties usually have several PUMAs, with socioeconomically and geographically similar municipalities grouped together.14 All households within a given PUMA are assumed to benefit equally from public goods expenditures made by local governments. Differences in local fiscal impacts between native and immigrant households may arise after aggregation to the state level to the extent that these populations exhibit dissimilar spatial distributions across New Jersey communities. State expenditures that are distributed using an average cost approach include general state services/state aid and municipal aid. At the local level, general county expenditures and general municipal expenditures are apportioned in the same fashion.

Second, numerous revenue and expenditure components are allocated using an average cost or benefit formula applied to the relevant population of "eligibles" (for example, individuals, households, or automobiles). Wherever possible we simulated public benefits to households as well as taxes paid by applying a knowledge of program rules and eligibility requirements to each household's income and demographic profile. The following aggregate expenditures were assigned using this methodology: administrative expenditures on elementary and secondary school education (both the state and local shares); higher education, including community colleges; Medicaid; general administrative expenses on Aid to Families with Dependent Children (AFDC), Supplemental Security Income (SSI), and General Assistance (GA); Pharmaceutical Assistance to the Aged and Disabled (PAAD); employment and training; programs for the aged, disabled, and veterans; property tax reimbursement; farm programs and agricultural extension services; Department of Motor Vehicles (DMV) administrative expenses; and gas and utility credits. Some revenue items are also estimated this way, including taxes on automobiles and gasoline, alcohol and tobacco, inheritances and estates, and business personal property.

Third, a micro-analytic approach is taken to build up estimates from the individual household level whenever the required information is included on the PUMS household record or when enough relevant data exist to approximate the benefit or tax payment with reasonable confidence. Items that are measured this way include AFDC benefits (from state and local government), per pupil expenditure on public elementary and secondary education, income taxes, state sales taxes, realty transfer taxes, property taxes, and utility taxes.

14  

Especially populous central cities are identified by the city alone. On the other hand, such sparsely settled counties as Salem, Cape May, Warren, and Sussex are not identified separately. With the exception of these four counties, PUMAs do not cross county boundaries, so it is a fairly straightforward task to assign the residents of each PUMA to a particular county.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Of the nearly $10.4 billion in current state expenditures that could reasonably be associated with households, we are able to assign nearly 70 percent on the basis of actual or probable use—that is, using either the second or third methodological approach mentioned above. The remaining 30 percent was for general state services. These comprise a number of general activities, including public safety and criminal justice, community development and environmental management, economic planning, transportation, and government administrative services (for example, legislature or governmental review). Government legislative and administrative functions account for nearly 40 percent of this total. These general costs were prorated among households. With the exception of education, most locally provided goods cannot be assigned to households on an actual-use basis. Most of these costs are truly general expenditures on indivisible public goods, and we allocate them using an average cost calculation. At the county level these items include general government expenditures, public safety, and public health.

Detailed Calculations
State Expenditures

Our discussion of the calculation of benefits received by New Jersey households from state government follows the order of their presentation in the tables accompanying this chapter. We first consider expenditures on general state services made on behalf of households and subsequently turn to expenditures on elementary, secondary, and higher education; Medicaid; means-tested income transfer programs; municipal aid; employment and training programs; programs for the aged and disabled; property tax reimbursements, and other allocable expenditures.

General State Services/State Aid. Expenditures on state-provided services and state aid programs include expenditures on near-pure public goods such as public safety and criminal justice; physical and mental health; educational, cultural, and intellectual development; community development and environmental management; economic planning, development, and security; transportation; and miscellaneous government administrative functions.15 Because of their indivisibility, these expenditures cannot be allocated to households on an individual-cost basis. There are no studies to date that document differential consumption between immigrant- and native-headed households of general state services. Therefore, these expenditures are allocated to households on a per household average-use basis, regardless of the nativity status of the household head.

15  

Government administrative services include governmental review and oversight, legislative activities, financial administration, and general government services (State of New Jersey, 1991b:B12).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Expenditures on state-provided services and state aid programs that are not otherwise allocable to individual households are first identified in the state budget.16 Total general expenditures are equal to the sum of expenditures on law enforcement, military activities, and the judiciary; general physical and mental health services; cultural and intellectual development services and supplemental education and training programs; community development and management of natural resources and recreational areas; economic planning and regulation and general social services programs; transportation programs, local and state highway facilities, and public transport; government direction and management and control functions; and special government services.17 We take one-twentieth of reported state total general expenditures and divide by the total number of households, both institutional and noninstitutional, in the 1990 PUMS sample.18 The resulting quotient of $1,119 is allocated equally to all New Jersey households, reflecting the assumption of average use by all households.

16  

General state services and state aid programs are funded under numerous subheadings and fund categories of the state budget. They may fall under the auspices of the Direct State Services, Grants-in-Aid, State Aid, or Debt Service subheadings of the General Fund, or they may be incurred as earmarked special expenditures or subsidies under the Property Tax Relief Fund, the Casino Control Fund, the Casino Revenue Fund, or the Gubernatorial Elections Fund. Because we are interested in allocating state expenditures to recipient households, not how the state labels these expenditures for accounting purposes, all current expenditures are considered in the model. See the Summary of Appropriations by Statewide Program in the General Information section of the State of New Jersey Budget (State of New Jersey, 1991b) for fund and subheading totals.

17  

A total of $3.4 billion was allocated as general expenditures on a prorated basis out of total state current expenditures of $11.47 billion for FY 1989–1990. General expenditures on law enforcement, military activities, and the judiciary equal the sum of three fund categories of expenditure under subheading (10) Public Safety and Criminal Justice. The first, under the Direct State Services and Grants-in-Aid subheadings of the General Fund, is net of expenditures on vehicular safety, detention/rehabilitation, and juvenile corrections. The second and third are expenditures on special law enforcement activities of the Casino Control Fund and the Gubernatorial Elections Fund, and comprise all the expenditures from these funds for FY 1989 –1990. General physical and mental health expenditures include those under Program Classifications of the Department of Health, (20) Physical and Mental Health: (21) Health Services, (22) Health Planning and Evaluation, and (25) Health Administration, as well as expenditures on (23) Mental Health Services for Community Services, in the Direct State Services section of the budget (State of New Jersey, 1991b). They also include those under Program Classifications of the Department of Health: (21) Health Services, (22) Health Planning and Evaluation, and (23) Mental Health Services of the Grants-in-Aid section of the budget. Additional expenditures on the Department of Health: (21) Health Services—Family Health Services are also included from the State Aid subheading of the Casino Revenue Fund. General expenditures on educational, cultural, and intellectual development include those under Program Classifications of the Department of Human Services, (30) Educational, Cultural and Intellectual Development: (33) Supplemental Education and Training Programs—Commission for the Blind and Visually Impaired, under the Direct State Services and Grants-in-Aid sections of the budget. They also include expenditures under Program Classifications of the Department of Education: (37) Cultural and Intellectual Development Services—library and museum support of the Direct State Services and State Aid sections of the budget. Additional general expenditures fall under Program Classifications of the Department of State: (37) Cultural and Intellectual Development Services—support of the arts of the Direct State Services, Grants-in-Aid, and State Aid sections of the budget. Finally, these expenditures also include, under Program Classifications of the Department of Human Services: (32) Operation and Support of Educational Institutions —Homemaker Adjustment Services in the Casino Revenue section of the budget. General expenditures on (40) Community Development and Environmental Management include expenditures under Program Classifications of the Department of Community Affairs: (41) Community Development Management —housing code, uniform construction code,and similar safety measures, of the Direct State Services, Grants-in-Aid, and State Aid sections of the budget. Also included are expenditures under the Program Classifications of the Department of Environmental Protection: (42) Natural Resource Management, (43) Environmental Quality, (44) Hazardous and Toxic Pollution Control, (45) Recreational Resource Management and (46) Environmental Planning and Administration under the Direct State Services, Grants-in-Aid, and State Aid sections of the budget. General expenditures on (50) Economic Planning, Development and Security include expenditures under Program Classifications of the Department of Commerce and Economic Development: (51) Economic Planning and Development—promoting business and tourism in the state, under the Direct State Services, Grants-in-Aid, and State Aid sections of the budget. Additional expenditures were incurred by the Department of Labor on (51) Economic Planning and Development—planning and program evaluation,under the Direct State Services section of the budget. Also included are expenditures on (52) Economic Regulation, given in the Direct State Services section of the General Fund in the Summary of Appropriations, by Statewide Program in the General Information Section of the budget, with the exception of expenditures on dairy industry regulation—market orders, as detailed in the Program Classifications of the Department of Agriculture: (52) Economic Regulation, under the Direct State Services section of the budget. The final component of these expenditures includes those on general (55) Social Services Programs—youth recreation, community resources, domestic and family/child abuse prevention/detection, as listed in the Direct State Services and Grants-in-Aid sections of the General Fund in the Summary of Appropriations, by Statewide Program in the General Information section of the budget. General expenditures on transportation programs include all expenditures on (60) Transportation Programs, as listed in the Direct State Services, Grants-in-Aid, and State Aid sections of the General Fund in the Summary of Appropriations, by Statewide Program, in the General Information section of the budget. Expenditures on government administrative functions include those classified under (70) Government Direction, Management and Control as detailed in footnote 5, in the Direct State Services, Grants-in-Aid, and State Aid sections of the General Fund in the Summary of Appropriations by Statewide Program, in the General Information section of the budget. Additional expenditures were incurred on (73) Financial Administration —casino gambling administration, of the Casino Control Fund, also given in the Summary of Appropriations by Statewide Program. Additional general government expenditures were incurred under Program Classifications of the Department of the Treasury: (75) State Subsidies and Financial Aid—general revenue sharing to municipalities, under the Property Tax Relief Fund (State Aid) section of the budget. General expenditures included (80) Special Government Services: (82) Protection of Citizens' Rights of the Direct State Services sections of the General and Casino Revenue Funds, as listed in the Summary of Appropriations by Statewide Program in the General Information section of the budget. Note as well that interest paid on publicly issued bonds was considered as a current general expenditure. These expenditures are detailed in the Debt Service section of the budget.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

18  

Recall that, although we do not consider the institutional population in this household-level analysis, that population is still relevant for determining the population base across which general expenditures are allocated.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Elementary and Secondary Education. State expenditures on public elementary and secondary education equal the sum of the state's contribution to per pupil expenditures in a school district plus the average per pupil share of state costs on general education administration and support services.

In New Jersey, the state share of a locality's school district budget varies according to the resources available to the district.19 In general, the fraction of per pupil expenditure paid by the state varies inversely with property wealth of the school district. Average per pupil expenditure for each PUMA is found by taking a weighted average of the per pupil expenditure of each school district20 in the PUMA, using as weights the average daily enrollment (ADE) figures reported by school districts. The same weights are applied to the state's share of each school district's per pupil expenditures to compute a PUMA-wide average share of public schooling costs borne by the state.21 The product of the PUMA's average per pupil expenditure and the average fraction for which the state is responsible yields a dollar figure for the state's elementary and secondary costs per pupil. This dollar figure is then allocated to every child who lives in the PUMA, is 6 to 17 years old, and for whom the variable ENROLL 22 indicates "in public school."

The state incurs additional costs for general education administration and management that are not part of a school district's per pupil expenditures.23 Because there is no prior belief that immigrantand native-born pupils consume

19  

In FY 1989–1990, the state contributed 39.8 percent, the federal government 3.8 percent, and local governments 56.4 percent on average to the per pupil cost of elementary and secondary education. The percentage breakdown is given in Evaluation Data of the Department of Education, (30) Educational, Cultural and Intellectual Development: (31) Direct Educational Services and Assistance in the Direct State Services section of the State of New Jersey Budget (State of New Jersey, 1991b). However, the state's share of school district expenditures varied dramatically by socioeconomic status of the school district, ranging from a low of 2.5 percent in Bay Head, Ocean County, to 78.2 percent in Woodlynne, Camden County (Rutgers, the State University of New Jersey, 1990).

20  

Per pupil expenditure data by district for the 1989–1990 school year were graciously supplied by Andrei Shidlowski of the New Jersey School Boards Association (1990).

21  

The ADE-weighted state share better reflects the true cost to the state of a public school pupil enrolled in a given PUMA than a simple average because it accounts for the fact that students are more likely to live in urban areas (with higher average state shares) than in suburban areas.

22  

ENROLL is the variable in the PUMS that indicates whether a person is currently enrolled in school, and conditional on enrollment, whether the school is public or private (Bureau of the Census, 1993:B-34).

23  

These general expenditures on elementary and secondary education are found in the Department of Education, (30) Educational, Cultural and Intellectual Development: (33) Supplemental Education and Training Programs—technical assistance and accreditation of local vocational education; (34) Educational Support Services—general academic education, curriculum development, and certification; and (35) Educational Administration and Management of the Direct State Services section of the budget. Additional general expenditures on (31) Direct Educational Services and Assistance—Teacher Recognition; (34) Educational Support Services and (35) Educational Support Services are detailed in the Grants-in-Aid section of the budget. General education expenditures on (33) Supplemental Education and Training Programs —general vocational education, and (34) Educational Support Services —general academic education and teacher pension contributions are given in the State Aid section of the budget. Finally, general education expenditures are also found in (34) Educational Support Services —teacher's pension assistance under the Property Tax Relief Fund—State Aid section of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

these general education expenditures differentially, such costs are allocated assuming average use by each public school pupil. Hence, we divide one-twentieth of general elementary and secondary education expenditures by the total number of public elementary and secondary school pupils in the state. The resulting average figure is then multiplied by the number of children ages 6 to 17 in the household who are enrolled in public school to arrive at state general elementary and secondary education expenditures for the household. The more children in a household who attend public schools, the higher is its utilization of state-funded school services.

Additional education costs are incurred by limited English proficient (LEP) students who are eligible for special education services such as remedial skills and bilingual education programs. Unfortunately, a direct estimate of these costs is not possible with the available data. The most detailed per pupil expenditure data available for the school year 1989–1990 do not separate bilingual education expenditures, but rather bundle them with expenditures on other state-sponsored education programs (New Jersey School Boards Association, 1990). There is no satisfactory way to break out bilingual education costs without making gross assumptions about relative school district participation in these state programs. Consequently, our methodology assigns the same per pupil expenditure to immigrant and native school children within a given PUMA, which is not entirely accurate because immigrants are more likely to utilize bilingual education programs. The problem is somewhat attenuated by the geographic concentration of immigrants in New Jersey in the large urban cores (Garvey, 1997). Per pupil expenditures are higher in the school districts serving these urban centers than in the surrounding school districts, partly reflecting the higher cost of education for LEP pupils.

Higher Education. The state of New Jersey supports 19 community colleges, 8 state colleges, 3 state universities (Rutgers, University of Medicine and Dentistry of New Jersey, and the New Jersey Institute of Technology), as well as private universities by providing scholarships and grants to eligible residents of the state who attend a private institution of higher learning in the state.

There are three important methodological issues involved in determining the costs to the state of a student enrolled in public higher education. First, the PUMS contains little information on receipt of higher education services. Although we can identify the type of institution attended with a reasonable degree

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

of confidence, we do not observe which college, technical college, or postgraduate school a household member attends, nor can we ascertain the program of study. A related empirical difficulty is determining the net cost to the state of a student's attendance at a state institution of higher learning, which is difficult to assess because of the unobserved variability in students' academic ability and receipt of financial aid. Finally, there is an ambiguity as to which households state expenditures on higher education should be attributed. The 1990 census questionnaire instructs respondents not to include their children who are away at college on the household roster (Bureau of the Census, 1990). Our household definition also excludes persons who live in group quarters. Hence, our measured cost to the state of higher education services is biased upward to the extent that students do not live at home or in noninstitutional settings within the state. On the other hand, a downward bias is imparted to estimates of average state expenditures on higher education insofar as students enrolled in New Jersey's institutions of higher learning are not residents of the state but temporarily form noninstitutional households within the state.

A partial resolution of the third problem is reasonably straightforward. In all the calculations, the population of interest across whom state higher education costs are to be attributed includes both households with students and students living in group quarters. The latter will pick up persons enrolled in public institutions of higher learning, but who live in dormitories or other group arrangements. Hence the denominator will reflect more correctly the universe of persons enrolled in public colleges and universities.24

Data supplied by the New Jersey Commission on Higher Education for fall 1994 (O'Connor, 1995) indicate that state residency is not an issue for most students enrolled in New Jersey institutions of higher education. Indeed, nearly 99 percent of full- and part-time undergraduates enrolled in community colleges were residents of the state, as were 90 percent of the full- and part-time undergraduates enrolled in New Jersey's public universities. Although over 95 percent of full-time undergraduates enrolled in the state colleges were residents of the state, only about 85 percent of their part-time counterparts were as well. However, the latter account for less than a fourth of undergraduate students enrolled part time in public institutions. A similar story is told even among undergraduates enrolled in private institutions in the state. Nearly 90 percent of part-time undergraduates enrolled in private institutions are New Jersey residents. Among full-time undergraduates enrolled in private institutions, the percent considered residents of the state is somewhat lower (70 percent), but again such enrollments account for less than 20 percent of full-time enrollments in all colleges and universities in the state. Hence, the bias caused by improperly estimating the size

24  

This solution does not assure a complete count of persons who attend New Jersey's institutions of higher education. Residents of a New Jersey household may attend school in another state, yet they will be considered as attendees of a New jersey institution in our calculations.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

of the recipient population of state expenditures on higher education services and state aid seems small.

The problem of estimating the net cost to the state of students enrolled in institutions of higher education is much thornier and cannot be fully addressed with census data. We assume that the net cost of educating a student enrolled in a particular type of institution is the same regardless of socioeconomic status, academic ability, or course of study. Although this is a questionable simplifying assumption, we find it preferable to the alternative of ignoring state expenditures on higher education altogether, or worse, assuming average per household use and allocating them in the same manner as general state expenditures. 25

A person is coded as attending an institution of higher education if ENROLL indicates he or she ''is enrolled in public or private school" and YEARSCH26 indicates the person "is a high school graduate or holds a GED or diploma." One-twentieth of state general expenditure on higher education is divided by the total number of students enrolled in a postsecondary program to arrive at the per student figure. We then allocate to each enrolled student in the household this average per student general expenditure on higher education.27 Clearly, the more students in a household who are enrolled in institutions of higher learning in the state, the greater the cost to the state of providing general education services to that household.28

State expenditures on different types of educational institutions are also allocated based on probable use in our model. A person is coded as attending a public institution of higher learning if ENROLL indicates the person is "enrolled in public school" and YEARSCH indicates he or she "is a high school graduate or holds a GED or diploma." One-twentieth of total state expenditure on public

25  

The PUMS does not contain enough detailed information on household assets, family income, and total family education expenditure and completely lacks data on student academic aptitude and program of study to permit accurate estimation of the value of student financial aid or the value of a particular state-provided or state-financed higher education.

26  

YEARSCH is the PUMS variable that describes educational attainment as the most recent grade completed at the time of the census (Bureau of the Census, 1993:B-4).

27  

General expenditures on higher education include expenditures on (30) Educational, Cultural and Intellectual Development: (36) Higher Educational Services, (5400) Office of the Chancellor—costs of educational grants, administration of student financial aid programs, in the Direct State Services and Grants-in-Aid sections of the state budget. They also include expenditures on (36) Higher Educational Service —interest on bonds for higher education facilities from the Debt Service section of the state budget (State of New Jersey, 1991b).

28  

Although our allocation algorithm considers all students enrolled in higher education as the population of "eligibles," we do not allocate higher education costs to students living in group quarters. This is consistent with adoption of the household as the unit of analysis.

29  

State expenditures on public higher education include expenditures on (30) Educational, Cultural and Intellectual Development: (36) Higher Educational Services, (5450+) State Colleges Programs—expenditures on state colleges and universities, in the Direct State Services section of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

postsecondary institutions29 is divided by the number of students enrolled in public institutions of higher learning to arrive at the average per student state expenditure on public higher education services. This average cost is allocated to each student in the household who is enrolled in a public institution of higher learning.

The state supports private institutions of higher learning in the state through grants to students and subsidies to institutions. A person is coded as attending a private postsecondary school if ENROLL indicates he or she is "enrolled in private school" and YEARSCH indicates the person "is a high school graduate or holds a GED or diploma." One-twentieth of total state expenditure on private postsecondary institutions30 is divided by the number of students enrolled in private institutions to arrive at the average per student state expenditure on private higher education services. We then allocate to each student enrolled in a private institution the average state per student expenditure on private institutions.

Finally, the state provides support to county colleges through state aid programs that benefit students enrolled in community colleges. A person is coded as attending a community college if ENROLL indicates he or she is "enrolled in public school" and YEARSCH indicates the person "is a high school graduate or holds a GED or diploma" and who has attained no more than "an associate degree in college in an academic program."31 One-twentieth of total state expenditure on community colleges32 is divided by the number of students potentially enrolled in community colleges to arrive at the average per student cost of state aid to county colleges. Each student in the household who is potentially enrolled in a community college is then allocated the average state expenditure on assistance to community colleges.

Medicaid. The state of New Jersey provides assistance for the "diagnosis,

30  

State expenditures on support of private institutions include expenditures on (30) Educational, Cultural and Intellectual Development: (36) Higher Educational Services—expenditures on private colleges and universities, in the Grants-in-Aid section of the state budget (State of New Jersey, 1991b).

31  

The reader will notice the slight overlap in the definitions of persons enrolled in public and private institutions of higher education and those enrolled in community colleges. Census data do not provide detailed information on the type of institution where a student is enrolled. Rather, it must be inferred from the ENROLL and YEARSCH variables. Although students may be double counted as enrolled in both a community college and another public institution of higher learning, the degree of overlap is not critical to the nature of the analysis. State aid to community colleges, as described below, is distinct from and complementary to state support of public colleges and universities and general higher education expenditures.

32  

State expenditures on support of community colleges include expenditures on (30) Educational, Cultural and Intellectual Development: (36) Higher Educational Services—aid to county colleges, in the State Aid section of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

treatment and correction" of medical problems for "New Jersey residents determined eligible for categorical assistance" under the auspices of its federally supported Medicaid program (State of New Jersey, 1991b:D-240). Those eligible for state Medicaid assistance include recipients of AFDC, SSI, medical assistance only, persons qualifying for the Special Supplemental Program for Women, Infants, and Children (WIC) and the state's medically needy programs, as well as foster children under the care of the Division of Youth and Family Services, and Cuban, Haitian, and Indo-Chinese refugees so certified under federal refugee programs.33 Medicaid expenditures per household are allocated based on all eligible households, both institutional and noninstitutional.34 Eligible households are those with a nonzero response to the census question on receipt of public assistance income (INCOME6), which includes SSI, AFDC, and GA payments (Bureau of the Census, 1993:B-17). We divide one-twentieth of total state expenditures on Medicaid payments and program costs by the number of households for which the variable INCOME6 is nonzero to arrive at the average state Medicaid cost per eligible household.35 We then allocate this average state cost figure to households who received public assistance in 1989.

AFDC/GA/SSI. Three programs comprise AFDC: AFDC-C provides assistance to families with minor dependent children in which at least one parent is dead, disabled, or absent from the household; AFDC-F provides assistance to families in which the father is unemployed; and AFDC-N supports families in which the parents' income is below a predetermined level as a result of insufficient employment.36 The first two programs were funded 50 percent by the

33  

Medicaid eligibility requirements are given in the objectives section of the Department of Human Services, (20) Physical and Mental Health Services: (24) Special Health Services, (7540) Division of Medical Assistance and Health Services in the Direct State Services section of the state budget (State of New Jersey, 1991b).

34  

Medicaid services are assumed to be consumed on an average per household use basis. This is a gross simplifying assumption, particularly as AFDC recipient households have different medical needs and resource utilization than disabled and elderly SSI recipients. Unfortunately, census data contain no information on health care expenditure or health care service use that would permit a better allocation of expenditures on an actual use basis.

35  

State expenditures on Medicaid payments and program costs are given in the Department of Human Services, (20) Physical and Mental Health: (24) Special Health Services—health services administration and management, in the Direct State Services section of the state budget. Expenditures are also given in the Department of Human Services, (20) Physical and Mental Health: (24) Special Health Services—general medical services of the Grants-in-Aid section of the state budget. Additional Medicaid expenditures are found in the Department of Human Services, (20) Physical and Mental Health: (24) Special Health Services—Medicaid expansion and Medical Assistance expenditures, in the Casino Revenue Fund (Grants-in-Aid) section of the state budget (State of New Jersey, 1991b).

36  

Eligibility requirements and payments for the three programs composing AFDC are detailed in the Introduction of the Department of Human Services, (50) Economic Planning, Development and Security: (53) Division of Economic Assistance and Security, (7550) Division of Economic Assistance in the State Aid section of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

federal government, 37.5 percent by state government, and 12.5 percent by local governments in FY 1989–90. The third program was funded 75 percent by the state and 25 percent by local governments.37 Because nearly 98 percent of state expenditures on AFDC payments are accounted for by AFDC-C and AFDC-F, we take 37.5 percent and 12.5 percent, respectively, as the state and local shares in AFDC payments in the analysis.38

The state share of AFDC payments received by households is calculated based on the household's response to the INCOME6 question. Households with children ages 17 and under, and where INCOME6 is reported as nonzero, are considered AFDC-eligible households; 37.5% of this reported income amount is allocated as the state's share in AFDC costs. There are also general administrative costs associated with AFDC program implementation that are not received by households as transfer payments. 39 These costs are assumed to be incurred equally by AFDC-eligible households. We divide one-twentieth of total state expenditures on AFDC program administration by the number of AFDC-eligible households to arrive at the average state AFDC administrative cost per eligible household. This figure is allocated equally among all AFDC-eligible households.

The federal Supplemental Security Income (SSI) program provides "direct federal income maintenance payments to aged, blind and disabled persons at a stipulated minimum level."40 The state of New Jersey supplements the federal payment by guaranteeing a minimum income level in excess of the federal minimum. SSI-eligible households are determined based on a number of characteristics. Households with no children under 18 (to avoid confusion with AFDC-eligible households), who report nonzero public assistance income in 1989 (INCOME6 > 0), and whose head indicates either that he or she is prevented from working due to disability (DISABL2 = 1) or that he or she is over 65 years of age are considered SSI-eligible households. It is not possible to determine the fed-

37  

Federal, state, and local shares of AFDC expenditures for FY 1989 –1990 are detailed in the Department of Human Services, (50) Economic Planning and Security: (53) Economic Assistance and Security, (7550) Division of Economic Assistance, in the State Aid section of the 1989–1990 budget (State of New Jersey, 1989).

38  

Expenditures by the state of New Jersey on AFDC-C and AFDC-F payments totaled $146,933,000 in FY 1989–1990, whereas expenditures on AFDC-N totaled only $3,268,000 (State of New Jersey, 1991b).

39  

State expenditures on AFDC administration are given in the Department of Human Services, (50) Economic Planning, Development and Security: (53) Economic Assistance, Division of Economic Assistance and Security —income maintenance program administration in the Direct State Services and Grants-in-Aid sections of the state budget (State of New Jersey, 1991b).

40  

Eligibility requirements and payments for SSI are detailed in the Introduction of the Department of Human Services, (50) Economic Planning, Development and Security: (53) Division of Economic Assistance and Security, (7550) Division of Economic Assistance in the State Aid section of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

eral, and therefore, state share of SSI payments from census data because of a lack of detail on the source of transfer payments. Hence, average SSI receipt is assumed for each eligible household. For such households, the state share of SSI transfer payments is equal to one-twentieth of total state expenditure on SSI transfer payments, divided equally among SSI-eligible households.

GA consists of financial aid to "needy persons not otherwise provided for under the laws of New Jersey."41 Households that indicate they received nonzero public assistance income in 1989 (INCOME6 > 0), that have no minor children (to avoid confounding AFDC and GA payments), and who are not eligible for SSI according to the above criteria are eligible households for GA. Because numerous programs with different eligibility requirements comprise GA, average receipt of state GA payments and administrative costs was assumed for all households. Hence, one-twentieth of total state expenditure on GA programs is divided equally among all potentially eligible households to allocate average state expenditure on GA programs to such households.

Pharmaceutical Assistance to the Aged and Disabled (PAAD). New Jersey funds a program that provides pharmaceutical assistance to the elderly and disabled. The state pays pharmacies the average wholesale price plus a dispensing fee for prescriptions required by low-income persons over 65.42 A married person over 65 in a household with total household income less than $12,000, or a single person over 65 with personal income less than $9000, was potentially eligible for prescription assistance in FY 1989–1990. Because census data contain no information on health care utilization, we allocate expenditures on pharmaceutical assistance to the eligible elderly on a prorated share basis. We divide one-twentieth of total state expenditure on pharmaceutical assistance for the elderly by the number of potentially eligible persons in the state to arrive at average state expenditure per eligible elder. This dollar figure is then allocated to each elderly person in the household whom we identify as potentially eligible for pharmaceutical assistance.43 The more impoverished elderly a household contains, the greater is its allocation of pharmaceutical assistance expenditures.

41  

Eligibility requirements and payments for GA are detailed in the Introduction of the Department of Human Services, (50) Economic Planning, Development and Security: (53) Division of Economic Assistance and Security, (7550) Division of Economic Assistance in the State Aid section of the state budget (State of New Jersey, 1991b).

42  

Eligibility requirements for PAA are given in the objectives section of the Department of Human Services, (20) Physical and Mental Health Services: (24) Special Health Services, (7540) Division of Medical Assistance and Health Services in the Direct State Services section of the state budget (State of New Jersey, 1991b).

43  

State expenditures on the pharmaceutical assistance program for the aged are detailed in the Department of Human Services, (20) Physical and Mental Health: (24) Special Health Services, (7540) Division of Medical Assistance and Health Services of the Direct State Services and Grants-in-Aid sections of General Fund, as well as in the Casino Revenue Fund (Grants-in-Aid) section of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Pharmaceutical assistance is also available for low-income persons under 65 who are disabled. State expenditures on pharmaceutical assistance for the disabled are allocated to persons who are potentially eligible to received such benefits. A married person under 65 who is disabled (DISABL2 = 1) and has total household income less than $16,750, or a single disabled person with personal income less than $13,650, was potentially eligible for pharmaceutical assistance in FY 1989 –1990. We allocate state expenditures on pharmaceutical assistance to the eligible disabled population in the same manner as the eligible elderly. We divide one-twentieth of total state expenditure on pharmaceutical assistance for the disabled by the number of potentially eligible persons in the state, which gives average state expenditure per person on pharmaceutical assistance for the disabled. This dollar figure is then allocated to each potentially eligible person in the household. 44

Municipal Aid Programs. New Jersey's state government distributes aid to municipalities for various purposes.45 Chief among these are Safe and Clean Neighborhoods, Municipal Revitalization, and Urban Aid. These expenditures are not randomly distributed across municipalities, but are targeted to depressed urban areas (Forsberg and Poethke, 1994; Forsberg, 1995). Because there is no evidence of differential consumption of state aid services by immigrant- and native-headed households within a municipality, state expenditures are assigned on an average use basis for each household. State expenditures on each municipal aid program are weighted by the population of each municipality in order to reflect the uneven distribution of households within a PUMA. For each municipal aid program, we take one-twentieth of weighted state expenditures on the program and divide by the number of households in the PUMA. The resulting figure is then allocated equally to each household in the PUMA.

Employment and Training Programs. State expenditures on employment

44  

State expenditures on pharmaceutical assistance for the disabled are detailed in the objectives section of the Department of Human Services, (20) Physical and Mental Health: (24) Special Health Services, (7540) Division of Medical Assistance and Health Services in the Casino Revenue Fund—Direct State Services and Grants-in-Aid sections of the state budget (State of New Jersey, 1991b).

45  

State expenditures on municipal aid programs are detailed in the Department of Community Affairs, (40) Community Development and Environmental Management: (41) Community Development and Management in the State Aid section of the state budget (State of New Jersey, 1991b).

46  

A detailed description of these employment and training programs can be found in the Program Classification of the Department of Labor (50) Economic Planning, Development and Security: (53) Economic Assistance and Security in the Direct State Services section of the state budget. Expenditures on unemployment insurance are given in this section, as well as in the Department of Labor (50) Economic Planning, Development and Security: (54) Manpower and Employment Services—UI job search, in the Grants-in-Aid section of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

and training programs include expenditures on state unemployment insurance (UI), state disability/worker's compensation, vocational rehabilitation services, and general manpower and employment services expenditures. Administrative costs of these programs are allocated on an average per eligible worker basis.

The unemployment insurance system is a state-administered, federally funded system of unemployment insurance coverage for almost all nonagricultural workers in the state.46 Persons are considered eligible for UI receipt if the variable INCOME8 47 is nonzero; YEARWK, which indicates the year the person last worked, is no earlier than 1989; and the person did not work a full 52 weeks in 1989 (1 <= WEEK89 < 52). One-twentieth of total state expenditure on UI administrative costs is divided by the number of potentially eligible UI recipients. The resulting average figure is then allocated to each eligible UI recipient in the household to arrive at the household's share of UI administrative costs.

Expenditures on state disability and workers' compensation administrative costs are also assigned on an average per eligible worker basis. 48 A person is deemed eligible for state disability/workers' compensation if INCOME749 is nonzero, he or she is between 16 and 65 years of age (to reduce the likelihood of counting retired persons and those not in the labor force), the person worked at some point in his or her life (YEARWK not equal to 7), and the person claims a disability that either limits (DISABL1 = 1) or prevents (DISABL2 = 1) work. We take one-twentieth of administrative expenditures on disability and workers' compensation programs and divide by the number of potentially eligible recipients to arrive at average administrative costs per eligible worker. Each potentially eligible person in a household is then assigned this average state expenditure on administration of worker disability and compensation programs.

Vocational rehabilitation services are provided to handicapped persons who are unable to work, with the goal of preparing them for gainful employment.50 The state supports a wide variety of programs, which include sheltered workshop support, medical, and day training programs. A person is coded as

47  

INCOME8, other income, includes UI payments, veterans' administration payments, alimony and child support, as well as gambling winnings and other periodic income (Bureau of the Census, 1993:B-17).

48  

State administrative expenditures on workers' compensation and disability programs are given in the Department of Labor (50) Economic Planning, Development and Security: (53) Economic Assistance and Security in the Direct State Services section of the state budget (State of New Jersey, 1991b).

49  

INCOME7 includes retirement and disability income from federal, state, or private sources, as well as receipts from annuities and retirement plans (Bureau of the Census, 1993:B-17).

50  

Vocational rehabilitation services are detailed in the Program Classifications of the Department of Labor, (50) Economic Planning, Development and Security: (54) Manpower and Employment Services in the Direct State Services section of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

eligible for vocational rehabilitation services if he or she is disabled in a way that prevents work (DISABL2 = 1) and the person is between the ages of 16 and 65.51 Average use of vocational rehabilitation services is assumed for all eligible persons. Total expenditure on vocational rehabilitation services is divided by the number of potentially eligible beneficiaries. This average state cost figure is then allocated equally to each eligible person in a household.52

State expenditures on manpower and employment services include expenditures on labor exchange services, employment development, and public- and private-sector labor relations.53 These services are assumed to be enjoyed by all workers on an equal basis. Workers are defined as those persons in military or civilian jobs (RLABOR = 1, 2, 4, or 5). We take one-twentieth of state expenditures on manpower and employment services and divide by the number of workers in the PUMS, which gives us average state per worker expenditure on manpower and employment services. Each worker in a household is then allocated this average dollar figure.

Programs for the Aged, Disabled, and Veterans. Programs for the aged encompass a vast array of protective, transportation, and day care services for the elderly.54 Allocation of these costs based on actual use is not possible due to limitations of census data. However, it is not unreasonable to allocate these expenditures on an average-use basis to all persons ages 65 and older. We divide one-twentieth of state expenditure on programs for the aged by the number of

51  

The eligibility criterion for use of vocational rehabilitation services certainly overestimates the potentially eligible population. In the absence of more detailed information on physical and mental impairment, however, it is the most precise eligibility definition possible.

52  

Expenditures on vocational rehabilitation services are given in the Department of Labor, (50) Economic Planning, Development and Security: (54) Manpower and Employment Services section of the Direct State Services and Grants-in-Aid sections of the General Fund in the state budget. Expenditures on these programs are also found under the same program heading of the Casino Revenue Fund, Grants-in-Aid section of the state budget (State of New Jersey, 1991b).

53  

Manpower and employment services expenditures are detailed in the Program Classifications of the Department of Labor, (50) Economic Planning, Development and Security: (54) Manpower and Employment Services—Employment Services, Employment Development, and Labor Relations of the Direct State Services section of the state budget (State of New Jersey, 1991b).

54  

Programs for the elderly are classified in many sections of the state budget. They include those in the Department of Community Affairs, (50) Economic Planning, Development and Security: (55) Social Services Programs—Programs for the Aging in the Direct State Services, General Fund section of the state budget. There are additional expenditures under the same program heading of the Casino Revenue Fund—Direct State Services and Grants-in-Aid sections. Other expenditures are given in the Department of Human Services, (50) Economic Planning, Development and Security: (55) Social Services Programs—Protective Services for the Elderly in the Casino Revenue Fund—Grants-in-Aid portion of the state budget. Additional expenditures are given in the Department of State, (70) Government Direction, Management and Control: (76) Management and Administration—respite care for elderly of the Casino Revenue Fund—Grants-in-Aid section of the state budget (State of New Jersey, 1991).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

persons 65 and older in the PUMS to arrive at average state expenditure per elderly person. This figure is then allocated to each senior citizen in the household. Hence, the more elderly persons in a household, the higher is its utilization of state programs for the aged.

Many expenditures targeted to the disabled population have been allocated to the eligible population as described above within the context of specific program objectives (e.g., vocational rehabilitation services). There are additional state expenditures on improved access to public transportation facilities for disabled residents of New Jersey.55 Because the census lacks information on public transportation use, we allocate a prorated share to eligible persons in each household. Eligible persons are defined as those who have a disability that either limits or prevents work (DISABL1 or DISABL2 = 1). We then divide one-twentieth of total state expenditure on transportation services for the disabled by the number of eligible disabled persons in the PUMS. This average state expenditure is then allocated to each eligible person in the household.

Programs for war veterans include various support programs and hospital services for veterans of U.S. military service.56 In the absence of detailed utilization information in the census, average consumption of services is assumed for all veterans. The eligible population is defined as those for whom the variable MILITARY indicates past service in the military or national guard (MILITARY = 2 or 3). One-twentieth of total state expenditure on veterans' programs is divided by the number of veterans in the PUMS. This average state expenditure on veterans' programs is then allocated to each veteran in the household.

Property Tax Reimbursements. The state government reimburses municipalities for property tax revenues lost as a result of property tax exemptions for the elderly, disabled, and military veterans.57 Householders who own or have a mortgage on their home (TENURE = 1 or 2) and who are either 65 or older, permanently disabled (DISABL2 = 1), or are military veterans are eligible for the tax exemption of $50. Households with such eligible household heads are then allocated the cost of the exemption.

55  

Expenditures on improved access to public transport are given in the Department of Transportation (60) Transportation Programs: (62) Public Transportation in the Casino Revenue Fund—State Aid section of the budget (State of New Jersey, 1991b).

56  

Expenditures on programs benefiting veterans are detailed in the Department of Military and Veterans' Affairs, (80) Special Government Services: (83) Services to Veterans in the Direct State Services and Grants-in-Aid sections of the state budget (State of New Jersey, 1991b).

57  

The property tax exemption program is detailed in the Program Classifications of the Department of the Treasury, (70) Government Direction, Management and Control: (75) State Subsidies and Financial Aid of the Direct State Services section of the state budget (State of New Jersey, 1991b, as well as in State of New Jersey, 1990d).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

Other Allocable Expenditures. This category of expenditure includes expenditures on a few other state programs that are not classified elsewhere. Expenditures on agricultural programs that primarily benefit farmers comprise a part of these expenditures.58 Farmers (defined as those for whom the OCCUP variable on the PUMS is between 473 and 476) are assumed to benefit equally from these expenditures. We divide one-twentieth of total state expenditure on farm programs by the number of farmers in the PUMS. We then allocate this average state expenditure on agricultural programs to each farmer in the household.

Department of Motor Vehicles (DMV) administrative costs are also included in this catchall category.59 Total DMV administrative expenditures are divided by the number of registered vehicles in the state to arrive at average per vehicle administrative expenditure. Each AUTO in a household is then assigned the per vehicle average cost of DMV administrative services.

The final category of allocable state expenditure is the Lifeline Credit Program, which provides up to $225 in combined gas and electric utility credits for households eligible for pharmaceutical assistance, SSI, or Medicaid.60 Households are deemed eligible for the Lifeline Credit Program if they are potentially eligible for AFDC/SSI/GA or pharmaceutical assistance as described under their respective program headings. Average use is assumed for eligible households. Thus, we divide one-twentieth of state expenditure on the Lifeline Credit Program by the number of potentially eligible households and then allocate this average state expenditure to each eligible household.61

58  

Expenditures on agricultural support programs are detailed in the Department of Agriculture (40) Community Development and Environmental Management: (42) Natural Resources Management—animal disease control, pest control, soil erosion programs, of the Direct State Services section of the state budget. Additional expenditures are classified under the Department of Agriculture, (50) Economic Planning, Development and Security: (51) Economic Planning and Development—marketing for New Jersey farm products and (52) Economic Regulation—market orders for dairy products, also in the Direct State Services section of the state budget (State of New Jersey, 1991b).

59  

Expenditures on DMV administrative services are given in the Department of Transportation, (10) Public Safety and Criminal Justice: (11) Vehicular Safety of the Direct State Services section of the state budget. The total number of registered vehicles in the state of New Jersey is given in the Federal Highway Administration's Highway Statistics 1990 (1991).

60  

Parameters of the Lifeline Credit Program are given in Program Classifications of the Department of Human Services, (50) Economic Planning, Development and Security: (53) Economic Assistance and Security, (7540) Division of Medical Assistance and Health Services in the Direct State Services section of the state budget (State of New Jersey, 1991b).

61  

Expenditures on the Lifeline Credit Program are detailed under the heading mentioned in the previous footnote, as well as in the Casino Revenue Fund—Direct State Services and Grants-in-Aid sections of the state budget (State of New Jersey, 1991b).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
State Revenues

Revenues collected by the state that are paid directly by households include those from the gross income tax, sales and use tax, motor vehicle fees, motor vehicle taxes, alcoholic beverage tax, cigarette tax, inheritance/estate transfer tax, business personal property tax, and the realty transfer tax.62 These sources accounted for nearly three-quarters of total state tax revenue in the fiscal year ending June 30, 1990 (State of New Jersey 1991a:4–5). We neglect corporate-sector taxes in our simulation, which causes us to underestimate state tax revenue by about 25 percent.

Gross Income Tax. The amount of income tax paid to the state is estimated using New Jersey state marginal tax rates and household income as reported by the household in the census. Gross income is first determined according to the procedures described in the 1989 New Jersey Gross Income Tax Resident Return form. Gross household income is calculated as the sum of wage and salary income (INCOME1); nonfarm self-employment income (INCOME2); farm self-employment income (INCOME3); and interest, dividend, and rental income (INCOME4) for all household members. 63 If gross income is less than $3,000, there is no tax liability in FY 1989–1990. We then subtract from gross income the dollar value of the household's total number of exemptions.64 The resulting figure is New Jersey taxable income. The marginal tax rate on the first $20,000 of taxable income is 2 percent, the marginal tax rate on the next $30,000 of taxable income (up to $50,000) is 2.5 percent, and the marginal tax rate on income over $50,000 is 3.5 percent (State of New Jersey, 1990b). Persons with negative taxable income owe no tax, but do not receive a tax credit from the state.

Sales and Use Tax. We base our estimate of sales and use tax revenue on the guidelines developed by the Internal Revenue Service for itemizing sales tax deductions on the federal income tax form. As detailed in the Instructions for Preparing Form 1040, the approximation takes into account the sales tax rate

62  

The question of tax incidence, or who really bears the burden of a given tax, is discussed in the introduction to the appendix. Our assumptions about tax incidence, which reflect the general consensus in the public finance literature, enable us to attribute revenues to contributing households.

63  

There is a no-offset provision in the New Jersey tax code, which prohibits taxpayers from writing off gains in one income category against losses in another income category. Hence, losses in the INCOME2-INCOME4 categories are set to 0 prior to summation.

64  

Tax exemptions in 1989 were set as follows. Married persons deducted $2,000 from gross income, single payers, $1000, and there were additional $1,000 exemptions for each senior citizen and minor child under 18 in the household. There were additional exemptions in the tax code for blind taxpayers and for special classes of dependents and children attending college away from home. Such exemptions are not considered in our simulation because they are not observed in census data (State of New Jersey, 1990b).

65  

The sales tax rate effective in New Jersey from January 1983 to July 1, 1990 was 6 percent.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

effective in the state at the time65 and varies with household size and income. We use the PUMS variables HHINC and PERSONS to determine total household income and household size, respectively. We then approximate each household's contribution to state sales tax receipts by inflating the Optional Sales Tax Table values (in the Instructions for Preparing Form 1040, 1987) by the growth in the CPI-U from 1986 to 1989.66

Automobile and Fuel Taxes. Motor vehicle taxes and the motor fuels tax are levied on automobiles in the state of New Jersey. The first component of motor vehicle taxes is the per vehicle inspection fee, whereas the second consists of the registration fee, which varies with the weight of the automobile and its date of purchase. We took the average cost of registering an automobile as the per vehicle fee.67 We then multiplied the number of automobiles owned by the household (AUTO) by the sum of the two motor vehicle taxes to arrive at the estimate of motor vehicle taxes paid by the household.

The motor fuels tax is levied on all motor vehicles in the state. The average per vehicle contribution to motor fuels tax revenue is estimated by dividing total revenues from the tax by the number of automobiles registered in the state.68 This estimate slightly overstates the average per auto contribution to motor fuels tax revenue because the tax also applies to buses, trucks, and motorcycles. However, the number of cars registered in New Jersey far exceeds the number of other motor vehicles, and automobiles account for over 90 percent of the registered vehicles in the state in 1990. Furthermore, the bias induced by our estimation strategy affects immigrant and native-headed households approximately equivalently. 69

Alcoholic Beverage and Cigarette Taxes. The calculations in our model take into account household composition in estimating each household's contribution to state revenue from alcoholic beverage and cigarette taxes. Average consump-

66  

The PUMS does not contain any information on household consumption expenditures, which renders a more precise estimate of household sales tax contributions impossible. The estimated sales tax payments in the Optional Sales Tax Tables are derived from estimates based on household consumption expenditures in the Consumer and Expenditure Survey (CEX). The CEX is a detailed survey of expenditures of a random sample of the U.S. population (U.S. Bureau of Labor Statistics, 1986). The estimates in the Optional Sales Tax are inflated by the CPI-U for the Northeast to reflect changes in the general price level in urban areas over the three-year period.

67  

The inspection fee was $2.50 per vehicle, and the average vehicle registration fee was $54.50 in FY 1989–1990 (Commerce Clearing House, 1990:930).

68  

State revenues from the Motor Fuels Tax for FY 1989–1990 are found in the Annual Report of the Division of Taxation State of New Jersey (1990a), while state automobile registrations are given in the Federal Highway Administration's Highway Statistics 1990 (1991).

69  

Foreign-born households possess 1.53 cars on average, whereas households with a native-born householder possess 1.70. Although this difference is statistically significant, it is negligible from the perspective of bias introduced by our estimation strategy.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

tion is assumed for all persons of at least the legal purchase age for each taxed commodity.70 Hence, we calculate an average contribution for each individual by dividing one-twentieth of the total revenue derived from each tax by the total number of persons eligible for that tax in the PUMS. 71 This figure is the average per person contribution for the given tax. Thus, a household's contribution to the state revenues derived from each of these taxes equals the product of the number of eligible persons in the household and the average per person contribution to the tax.

Transfer Inheritance and Estate Tax. The transfer inheritance and estate tax is most appropriately estimated on a per household basis. The likelihood that an immigrant-headed household must pay transfer inheritance taxes in a given year is less than a native-headed household of similar demographic and socioeconomic characteristics because immigrants are less likely to have friends or family members in the United States from whom they may inherit property.

In the absence of detailed inheritance data in the census, inheritance and estate taxes are allocated to eligible households on a prorated share basis. The number of households across whom revenue from the transfer inheritance and estate tax is to be attributed is taken as the number of native-headed households plus the number of immigrant-headed households whose head immigrated to the United States before 1970. 72 Twenty years serves as a conservative estimate of the length of time necessary to raise the probability of inheritance for an immigrant householder to that of a native-born householder in 1989. We take one-twentieth of total state revenue from the transfer inheritance and estate tax73 and divide it by the number of potentially eligible households to arrive at a per eligible household figure. We then attribute this average contribution to households that potentially received an inheritance in 1989 to arrive at our estimate of inheritance taxes paid by each household.

Business Personal Property Tax. Revenues from the business personal property tax are allocated on a per eligible prorated share basis. Eligible persons are those for whom the variable CLASS74 indicates that he or she is self-employed in

70  

The PUMS does not contain detailed information on consumption of goods and services. Although the CEX does provide such data, it is impossible to identify the state of residence from the survey.

71  

Eligible persons for the alcoholic beverage tax are those ages 21 and older, and for the cigarette tax, 18 and older. Revenues derived from the Alcoholic Beverage Tax and the Cigarette Tax are given in the Annual Report of the Division of Taxation (State of New Jersey, 1991a).

72  

Such immigrant heads have a value of 7 or greater for the IMMIGR variable on the PUMS, which indicates the period of arrival in the United States.

73  

State revenue from the Transfer Inheritance and Estate Tax is given in the Annual Report of the Division of Taxation (State of New Jersey, 1991a).

74  

CLASS indicates whether a worker is a private wage or salary worker; a local, state, or federal worker; a self-employed worker in an incorporated or unincorporated business; or an unpaid worker in a family business (Bureau of the Census, 1993:5–22).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

an incorporated or unincorporated business. We then divide one-twentieth of the total state revenue from the business personal property tax 75 by the number of self-employed persons in the PUMS to arrive at the average contribution of each self-employed worker to the business personal property tax. Multiplying this average figure by the number of self-employed persons in the household gives our estimate of the business personal property tax paid by each household.

Realty Transfer Tax. The realty transfer tax is imposed on the recording of deeds and the transfer of titles to real property between individuals or institutions. We assume that statutory incidence of the tax is equivalent to economic incidence. Hence, the tax, which is paid by purchasers of homes at the time of closing, is allocated to potentially eligible households. Eligible households have householders for whom the variable TENURE 76 indicates the household owns its dwelling, and the variable YRMOVED 77 indicates the householder moved into the unit during 1989. For such households, revenues from the realty transfer tax78 are calculated as $1.75 per $500 property VALUE79 up to $150,000, and $2.50 per $500 property VALUE in excess of $150,000.

Local Expenditures

Local expenditures include those incurred by county and municipal governments. Our strategy involves prorating categories of local expenditure that do not permit allocation to specific households on an average-share basis. For municipal expenditures, the proration pertains to all households in the PUMA, which is typically smaller than a county. PUMAs are aggregated to the county level to prorate general county expenditures. Our discussion of the calculation of benefits received by New Jersey households from county and municipal government follows the order of their presentation in the tables describing the fiscal impact of households on local governments. We first consider expenditures on general county services made on behalf of households and subsequently turn to general municipal expenditures, expenditures on elementary and secondary public education services, county colleges, and transfer payments through AFDC.

75  

State revenue from the Business Personal Property Tax is given in the Annual Report of the Division of Taxation (State of New Jersey, 1991a).

76  

TENURE indicates whether a residential unit is owner or renter occupied (Bureau of the Census, 1993:5–11).

77  

YRMOVED indicates the year the householder moved into the dwelling (Bureau of the Census, 1993, p. B-50).

78  

The marginal tax rates of the realty transfer fee are given in the Annual Report of the Division of Taxation (State of New Jersey, 1991a).

79  

VALUE is the respondent's estimate of the sale price he or she would expect to obtain for the dwelling and its lot if it were put on the market (Bureau of the Census, 1993:B-49). Because VALUE is a categorical variable, midpoints of each category are used in the calculations.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

General County Expenditures. Our model assumes average use of several types of services provided by county governments. Total general county expenditure includes general government operations, judicial functions (excluding correctional and penal expenditures), public safety, public works, general health and welfare (excluding expenditures for the county welfare board), recreation and conservation, nonschool education expenditures (i.e., libraries and other educational services), and interest payments on local debt.80 We divide one-twentieth of total general county expenditures by the number of households in each county to arrive at average general county expenditures per household.81 We then allocate average general county expenditures to each household residing in a particular county.

County expenditure on the local agricultural extension service is included under general county expenditures, although it is allocated to households on an actual-use basis. Although such services exist for the benefit of all households, they primarily benefit local farmers. Farmers (defined as those for whom the OCCUP variable is between 473 and 476) are assumed to benefit equally from these expenditures. Hence, we divide one-twentieth of county expenditures on the agricultural extension by the number of farmers in the county and allocate the resulting average figure to each farmer in the household.

General Municipal Expenditures. Our model also assumes average cost in allocating several types of municipal government expenditure to households. Total general municipal expenditures include those labeled General Government, Judiciary, Public Safety, Public Works, Health and Welfare (excluding expenditures on Welfare-Public Assistance), Recreation and Conservation, Education (excluding schools), Statutory Expenditures (includes costs of employee benefits, taxes, and pension contributions), and Debt Service (interest payments).82 We sum these expenditures for all municipalities in a PUMA. We then take one-twentieth of this total general municipal expenditure and divide by the number of households in the PUMA to arrive at average general municipal expenditures per

80  

These expenditures are detailed by county in the Summary of 21 County Government Data Sheets in the County Government Fiscal Data section of the Fifty-Second Annual Report of the Division of Local Government Services, 1989: Statements of Financial Condition of Counties and Municipalities (State of New Jersey, 1990c).

81  

The PUMS does not permit separate identification of four counties. These include Sussex and Warren counties as well as Salem and Cape May counties (Bureau of the Census, 1993). For these two county groups, we determine average general county expenditure by summing one-twentieth of general county expenditures over the two counties and dividing by the number of households in both counties.

82  

Municipal government expenditures are given in the Municipal Fiscal Data section of the Fifty-Second Annual Report of the Division of Local Government Services, 1989: Statements of Financial Condition of Counties and Municipalities (State of New Jersey, 1990c).

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

household. The resulting average dollar figure is then allocated to each household in the PUMA.

Elementary and Secondary Education. There are three types of local government expenditure on education: general elementary and secondary education, the local share of per pupil expenditure on public elementary and secondary education, and county vocational schools. We allocate these expenditures to households on an actual-use basis.

General elementary and secondary education expenditures comprise county-level expenditures on the county superintendent of schools. As in the case of state expenditures on elementary and secondary education, we count all children enrolled in public school in the household. We aggregate this figure across all households in the county. We then take one-twentieth of the total expenditures on the county superintendent of schools, divide it by the number of public school pupils in the county, and allocate the resulting average to each public school pupil in a household. Summing across public school pupils in the household yields the household's contribution to general elementary and secondary education costs.

We discussed the calculation of average per pupil expenditure by PUMA in the section that describes the allocation of state elementary and secondary education expenditure. The fraction of average per pupil expenditure for which localities are responsible is calculated as one minus the average state share. Hence, each PUMA's local elementary and secondary school costs per pupil are simply the product of the PUMA's average per pupil expenditure and the average local share. Thus, for every child in the household ages 6 through 17 for whom the variable ENROLL indicates ''in public school," the local share of the PUMA of residence's average per pupil expenditure is added to local expenditures on that household.

All counties, with the exception of Hunterdon, support county vocational schools that provide intensive preparation for students interested in technical occupations. Because these schools are highly specialized, they invest in costly equipment and enroll relatively few pupils. As a result, their per pupil expenditures are quite high, ranging from $8,000 to $23,000 per pupil in 1989.83 We define persons who are potentially enrolled in county vocational education in the following way. Persons ages 18 through 21 who indicate they are ENROLLED in a public school, who have completed no less than 9th grade and no more than 12th grade, and do not have a diploma (6 <= YEARSCH <= 9) are considered potentially enrolled in a county vocational school.84 We then take one-twentieth

83  

Figures provided by the New Jersey School Boards Association (1990).

84  

This definition, although as precise as possible with the available data, still overestimates by roughly a factor of three the number of persons enrolled in county vocational schools.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

of the county's total expenditure on vocational schools and divide it by the number of potential vocational education students, which yields the county's average expenditure per potential vocational student. Multiplying this figure by the number of potential vocational education students in the household gives each household's contribution to the costs of county vocational education.

County College. Counties contribute to the support of their local community colleges. As described above under state expenditures, a person is coded as attending a community college if ENROLL indicates "enrolled in public school" and YEARSCH indicates "is a high school graduate or holds a GED or diploma" and if the person has attained no more than "an associate degree in college in an academic program.'' One-twentieth of the county's total expenditure on community colleges is divided by the number of students potentially enrolled in the county's community college to arrive at the per student cost. Each student potentially enrolled in a county college is then allocated the average county expenditure on the community college.

Aid to Families with Dependent Children. AFDC costs are allocated to households on an actual-use basis. For each eligible household,85 local expenditures on AFDC are calculated as 12.5 percent of each household's reported public assistance income (INCOME6).

Local Revenues

Property Taxes. Property taxes are the most important taxes paid by households to local governments. To estimate property tax payments, we use actual property taxes paid by homeowners and impute property taxes paid by renters. Householders who own their own dwellings (TENURE = 1 or 2) were asked to report on their 1990 census questionnaire the amount of property tax they paid in 1989. Property taxes paid by such households are reported as ranges in the categorical variable RTAXAMT. We take the midpoint of the category as a point estimate of property tax paid in 1989. For homeowners who were in the highest category of RTAXAMT with no upper bound on property tax paid and for those who did not report paying real estate taxes, we use the estimated market VALUE of the residence and multiply this figure by the population-weighted equalized property tax rate for the PUMA of residence86 to estimate property taxes paid.

85  

For a description of eligibility requirements for AFDC, state and local share of AFDC costs, and the determination of household AFDC receipt, see the discussion of the allocation of state AFDC expenditures.

86  

Equalized property tax rates correct for the fact that assessed value in New Jersey municipalities rarely equals the true market value of a residence. They are defined such that the product of the equalized tax rate and the estimated market value of a residence equals the amount of property tax calculated by multiplying the statutory property tax rate by assessed value. Equalized property tax rates often vary widely across municipalities within a PUMA and tend to move inversely with the property wealth of a municipality. To account for this disparity in equalized rates and the fact that the population of a PUMA tends to be concentrated in the relatively high tax rate urban areas, we weight the equalized property tax rate by the fraction of the PUMA's population in the municipality to arrive at the equalized property tax rate of the PUMA.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

To estimate property taxes paid by renters, we assume that taxes are capitalized in the value of rental property (Yinger, 1982) and that property taxes are passed on to renters by owners. If we conceptualize rent as payment for a stream of housing services, property taxes paid are equal to annual contract rent87 multiplied by [t/(t+i)], where t is the local equalized property tax rate and i is a discount rate, assumed in our calculation to be the average 30-year mortgage rate over the 1985–1995 period or 8 percent.88

Public Utility Gross Receipts Tax. The public utility gross receipts tax is levied on water, sewer, gas, electric, and power utilities in the state. We calculate the taxes remitted by households on an actual-use basis. We sum the ELECCOST, GASCOST, WATRCOST, and FUELCOST payments of households to arrive at total utility payments.89 We then apply the statutory tax rate, 7.5 percent to total utility payments to calculate the public utility tax paid by the household.

ACKNOWLEDGMENTS

This chapter is an expanded version of Deborah L. Garvey and Thomas J. Espenshade, "State and Local Fiscal Impacts of New Jersey's Immigrant and Native Households," in T.J. Espenshade, ed., Keys to Successful Immigration: Implications of the New Jersey Experience (Washington, D.C.: The Urban Insti-

87  

Annual contract rent is defined as 12 times monthly contract rent. Monthly rent is reported as ranges in the categorical variable RENT1 in the 1990 census. We take the midpoint of each category as an estimate of monthly rent paid (Bureau of the Census, 1993:B-41).

88  

We thank Robert Inman for suggesting the capitalized value approach to us. In earlier work, Espenshade and King (1994) used a different approach for estimating renters' property tax contributions. They based their calculations on New Jersey guidelines (State of New Jersey, 1990b; Public Law, 1990) and multiplied annual contract rent by 18 percent to approximate the fraction of rent payments that compensates owners for property taxes. This method and the capitalized value approach give identical results if the equalized tax rate is 1.76 percent and if the assumed discount rate is 8 percent.

89  

These variables give households' annual payments for electricity, gas service, water, and home heating fuel, respectively (Bureau of the Census, 1993:B-48). We assign the mean utility cost of same-sized households to those households who reported paying utilities as part of their rent (GASCOST or WATRCOST or ELECCOST or FUELCOST = 1). Approximately 1 percent of households reported no energy consumption whatsoever (WATRCOST = FUELCOST = ELECCOST = 2). These households were assigned the mean value of same-sized households' energy expenditures.

Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

tute Press, 1997). Financial support for this research was provided by a grant from the Andrew W. Mellon Foundation. We are grateful to the following individuals for supplying information, data, and guidance about the operations of state and local government programs: Pat Austin, Maryann Belanger, Gerald Dowgin, Pamela Espenshade, Mary Forsberg, David Grimm, Evelyn Klingler, Robert Lupp, Linda O'Connor, Marc Pfeiffer, Deena Schorr, and Mel Wyns. Andrei Shidlowski, from the New Jersey School Boards Association, prepared the data on per pupil expenditure. Valuable comments were received from members of the National Research Council's Panel on the Demographic and Economic Impacts of Immigration at a workshop in Irvine, California, January 25–26, 1996. Melanie Adams and Maya Smith provided skillful technical and research assistance.

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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×

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×

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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
×
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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Suggested Citation:"3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study." National Research Council. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, DC: The National Academies Press. doi: 10.17226/5985.
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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration Get This Book
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The New Americans (NRC 1997) presents an analysis of the economic gains and losses from immigration--for the nation, states, and local areas--providing a scientific foundation for public discussion and policymaking. This companion book of systematic research presents nine original and synthesis papers with detailed data and analysis that support and extend the work in the first book and point the way for future work. The Immigration Debate includes case studies of the fiscal effects of immigration in New Jersey and California, studies of the impact of immigration on population redistribution and on crime in the United States, and much more.

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