Illegal immigration is an important issue, especially in California, New York, Texas, Florida, Illinois, Arizona, and New Jersey—the states estimated to account for over three-fourths of the illegal alien population. Illegal aliens are a concern not only because they are breaking immigration laws but for various other reasons. For example, state and local governments are especially concerned about the effect on their budgets of providing benefits and services to illegal aliens. In addition, there are concerns about whether the presence of illegal alien workers has negative effects on the employment of U.S. workers. Public concern about the number of illegal aliens residing in the United States led to the passage of major immigration legislation in the 1980s. In an effort to reduce the size of the nation’s illegal alien population, estimated at 3 to 5 million in 1986, the Congress enacted the Immigration Reform and Control Act of 1986 (IRCA). IRCA attempted to deter the inflow of illegal aliens by prohibiting employers from hiring anyone not authorized to work. IRCA also provided that under certain circumstances, an illegal alien’s status could be adjusted to lawful permanent resident.Almost 3 million illegal aliens acquired lawful permanent residence as a result of IRCA. Despite a brief drop in the estimated number of illegal entries to the United States after IRCA was enacted, the inflow of illegal aliens has subsequently increased, so that the size of the illegal alien population is now estimated to have increased once more to pre-IRCA levels. INS estimated that there were 3.4 million illegal aliens residing in the country in October 1992. Updating this estimate would place the illegal alien population at about 4 million in 1994. The Bureau of the Census estimated that the size of the illegal alien population was between 3.5 million and 4 million in April 1994. Illegal aliens are not eligible for most federal benefit programs, including Supplemental Security Income, Aid to Families With Dependent Children (AFDC), Food Stamps, unemployment compensation, financial assistance for higher education, and the Job Training Partnership Act (JTPA).However, they may participate in certain benefit programs that do not require legal immigration status as a condition of eligibility, such as Head Start, the Special Supplemental Food Program for Women, Infants, and Children (WIC), and the school lunch program. In addition, they are eligible for emergency medical services, including childbirth services, under Medicaid if they meet the program’s conditions of eligibility. Illegal aliens may apply for AFDC and food stamps on behalf of their U.S. citizen children. Although it is the child and not the parent in such cases who qualifies for the programs, benefits help support the child’s family. Illegal aliens may not work in the United States or legally obtain Social Security numbers for work purposes. However, many illegal aliens do work and have Social Security taxes withheld from their wages based on falsely obtained numbers. Illegal aliens are not explicitly barred from receiving Social Security benefits; nonetheless, some illegal aliens may not be able to collect benefits because an individual generally must have obtained a valid Social Security number to receive credit for work performed. Illegal aliens generate revenues as well as costs; these revenues offset some of the costs that governments incur. Research studies indicate that many illegal aliens pay taxes, including federal and state income taxes; Social Security tax; and sales, gasoline, and property taxes. However, researchers disagree on the amount of revenues illegal aliens generate and the extent to which these revenues offset government costs for benefits and services. Over the past few years, the states with the largest illegal alien populations have developed estimates of the costs they incur in providing benefits and services to illegal aliens. These estimates vary considerably in the range of costs included and methodologies used. Two states, California and Texas, also have estimated the public revenues that illegal aliens generate. In a recent report, we reviewed California’s estimates of three costs for illegal aliens—elementary and secondary education, Medicaid, and adult incarceration—and various revenues from this population. Although we adjusted the cost estimates based on our assessment of the state’s assumptions, we cited several data limitations that prevented us from developing precise estimates. The even more extensive data limitations on the revenue side precluded us from making any assessment of the revenue estimates. The literature on the public fiscal impact of illegal aliens reflects considerable agreement among researchers that illegal aliens are a net cost, though the magnitude of the cost is a subject of continued debate. We identified 13 studies issued between 1984 and 1994 that developed estimates of the net costs of illegal aliens. Many of the studies focused on the illegal alien population in specific states, such as California or Texas, or specific areas, such as San Diego County or Los Angeles County. In addition, the range of costs and revenues included in the studies varied depending on the level of government examined: local, state, federal, or some combination of these. All but one study concluded that illegal aliens generated more in public costs than they contributed in revenues to government. (See app. I for a list of the studies.) Only 3 of the 13 studies estimated the fiscal impact of all illegal aliens in the United States on all levels of government. The three studies that have estimated the national net cost of illegal aliens have generated considerable media attention and public discussion. Each concluded that illegal aliens generate more in costs than revenues at the national level, but their estimates of the magnitude of the net cost varied considerably. The studies faced the difficult task of developing estimates of the public fiscal impact of a population on which little data are available. They generally relied on indirect approaches; as a result, the reasonableness of many of their assumptions are unknown. In addition, the studies differed considerably in the range of costs and revenues they included and their treatment of certain items, which makes them difficult to compare. For these reasons, a great deal of uncertainty remains about the actual national net cost of illegal aliens. Donald Huddle estimated that the national net cost of illegal aliens to federal, state, and local governments was $11.9 billion in 1992. This estimate was followed by an Urban Institute review of Huddle’s work, which adjusted some of Huddle’s cost and revenue estimates and estimated a much lower net cost for 1992—$1.9 billion. Responding to the Urban Institute’s criticisms, Huddle subsequently produced an updated estimate for 1993 that was higher than his initial estimate—$19.3 billion. (See app. II for a list of the costs and revenues included in each of the estimates.) The net cost estimates in each of the national studies are derived from three major components: (1) the direct costs of providing public benefits and services to illegal aliens, (2) displacement costs—the costs of providing various types of public assistance to U.S. citizens displaced from their jobs by illegal aliens, and (3) public revenues attributable to illegal aliens. A comparison of Huddle’s initial study with the Urban Institute’s study indicates that the major differences were in their estimates of displacement costs and revenues. Their estimates of direct program costs were relatively similar, as shown in figure 1. In their study, the Urban Institute researchers did not develop a completely independent estimate but instead adjusted some of the cost and revenue estimates in Huddle’s initial study to obtain what they believed to be a more reasonable estimate. The Urban Institute study also added certain revenues that were not included in Huddle’s initial study, such as payroll taxes (Social Security and unemployment compensation) and federal gasoline tax. In developing their own estimate, Urban Institute researchers used some of Huddle’s assumptions. In particular, the Urban Institute study used Huddle’s estimate of the size of the illegal alien population—4.8 million illegal aliens—for purposes of comparability, though the study maintained that this estimate was too high. Huddle’s update of his earlier study differs substantially from the Urban Institute study in all three components of the net cost estimates, with the largest difference occurring between the estimates of direct program costs (see fig. 1). The reason for this difference is primarily because Huddle’s updated study includes over $10 billion for direct cost items that were not included in either his initial study or the Urban Institute study. National data on illegal aliens’ use of public services and level of tax payments generally are not available. Various national databases that contain extensive data on the resident population’s use of public services and household characteristics, for example, do not have data on the immigration status of respondents who are not U.S. citizens. Questions about immigration status are not included on Census surveys because they might provoke untruthful responses and thereby affect the quality of the survey data, according to a Census official. Because of such data limitations, the national studies relied on indirect approaches to estimate the costs and revenues attributable to illegal aliens. In using these approaches, the studies made assumptions whose reasonableness is often unknown. To estimate direct program costs, for example, the studies multiplied their estimates of the average number of illegal aliens who received a benefit or service times the average annual program cost per illegal alien. However, data generally are not available to assess whether the assumptions used in estimating illegal aliens’ recipiency rates and average costs were reasonable. For example, for some programs, one or more of the studies assumed that illegal aliens had the same recipiency rate and average cost as the overall population served by the program. Huddle’s updated study made this assumption in estimating costs for Head Start and adult education. For other programs, the studies adjusted the national recipiency rate or average cost upward or downward to reflect a presumed difference in the use of the program by illegal aliens. For example, in estimating the cost of housing assistance, Huddle’s initial and updated studies assumed that the recipiency rate and average cost were higher for illegal aliens than for the overall population served by this program. The Urban Institute’s study assumed that the recipiency rate was higher but that the average cost was the same. For still other programs, the studies estimated the public service use of illegal aliens by using data on populations that included groups in addition to illegal aliens.