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Poor Economic Conditions in Alabama Will Get Worse with New Immigration Law

State Sinks Itself Deeper into a Hole

SOURCE: AP/Dave Martin

Protestors march outside the Alabama Capitol during a demonstration against Alabama's immigration law in Montgomery, Ala.

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Alabama’s state motto, “We dare defend our rights,” seems particularly ironic given the recent passage of their new immigration bill, H.B. 56. The draconian new law includes provisions that require police to verify the immigration status of individuals they stop if the officers have ”reasonable suspicion” that the drivers are here without documentation. It also makes it a felony for undocumented immigrants to conduct business transactions with the state, which includes services such as providing running water to a home.

The law has the potential to be so damaging to the state that even Alabama Attorney General Luther Strange advocates repealing parts of it.

Given the current fiscal and economic woes of the state, including the recent municipal bankruptcy of Jefferson County, and the negative economic impact of the law—which will come out of the pockets of Alabama residents—Alabamians should be asking whose rights are being defended—and at what cost.

We examine those woes here, along with how the new law will make them worse. Clearly the state cannot afford it.

Law’s economic benefits are an illusion

Proponents of the law argue there are positive effects for Alabamians as the result of the bill. Most notably, they claim that the recent drop in Alabama’s unemployment rate—from 9.8 percent in September to 9.3 percent in October 2011—is a result of the law. Unfortunately for them, a closer look at the numbers proves them wrong.

Alabama did see an increase in the number of employed people in their state. In October there were 3,578 more people with jobs than in September. But the drop in the unemployment rate was due more to the fact that 6,258 people left the labor force during the same time period. In order to be counted among the unemployed, an individual has to be actively looking for work. People who have been out of work for a long period of time and have given up on looking for a new job thus no longer “count” as unemployed.

Take, for instance, Baldwin County. Its unemployment rate dropped from 8.7 percent to 8 percent from September to October 2011, in spite of the fact that there were 106 fewer jobs in the county in October. But during the same time frame 720 people left the labor force, so even though 106 jobs were eliminated, the unemployment rate still fell. Conecuh County experienced a similar event: The unemployment rate dropped from 15.2 percent to 14.5 percent, even though the number of employed individuals did not change at all. The drop was simply due to a reduction in the size of the labor force.

Overall, Alabama’s unemployment rate has been higher than the rest of the nation since January 2011.

Things were bad before the law

What’s more, Alabama has been suffering economically for years for reasons that have nothing to do with immigration.

The state has historically scored worse on economic indicators than the rest of the United States. In 2010, for example, 15.1 percent of Americans were living in poverty compared to 19 percent of the population of Alabama, placing it 47th in the nation. And that was at a time when Alabama’s unemployment rate was lower than the national average. The median household income for Alabamians in 2009 was $40,547, nearly $10,000 less than the national average.

The effects are particularly devastating given the economic instability of its residents, and the fact that only slightly more than half of those who are out of work receive unemployment benefits.

Jefferson County’s bankruptcy ups the economic pressure

The passage of Alabama’s new immigration law could not come at a worse time for Alabama residents. Not only do they have to contend with the bleak economic picture just described, but the impact of Jefferson County’s recent bankruptcy will be felt across the state, and the negative economic impacts of the new bill—including high legal fees, increases in the costs of services, and extensive new costs to law enforcement—will pile on top of the negative impacts from the bankruptcy.

On November 9, 2011, Jefferson County—the most populous county in the state—filed for the largest municipal bankruptcy in the history of the United States with a debt of $4.1 billion. There are several factors that contributed to the county’s financial problems, the most notable of which is $3.2 billion of debt resulting from upgrades to the county sewer system.

Jefferson County was ordered to upgrade its sanitary system in 1996 because it was polluting rivers and streams with runoff. The entire process was plagued with corruption, and it resulted in criminal convictions for five former county commissioners. Most of the debt from upgrading the system was refinanced in the early 2000s, which resulted in higher interest rates after the nation’s financial collapse in 2008. Negotiations to reduce the debt were unsuccessful, and the current Jefferson County Commission “concluded that filing [for bankruptcy] was the best way to protect the County’s limited cash and restructure the County’s debt obligations."

The full effects of the bankruptcy will not be known for some time, but there is little doubt that it will be bad for both Jefferson County and the state as a whole. The credit rating of Jefferson County will certainly be downgraded, leading to higher interest rates on money it may need to borrow in the future, and the economy of the county will likely be further depressed. An outside firm has been hired to provide legal services to the county, and estimates of the legal costs associated with the bankruptcy filing are as high as $1 million dollars per month.

So what does the bankruptcy filing in Jefferson County have to do with immigration and H.B. 56? In some ways, they aren’t related at all. The financial problems facing Jefferson County are the result of corrupt public officials and the Great Recession, neither of which have any connection to the 2.5 percent of Alabama’s population that is undocumented.

And yet in an unfortunate twist, the negative impacts of the bankruptcy exacerbate the negative economic impacts of the immigration law.

At the same time that Jefferson County is paying lawyers $1 million a month to move forward with the bankruptcy, the state will also need to defend H.B. 56 in court. In the first year after the passage of Arizona’s similar—though less extreme—law, the state spent $1.9 million defending its legality in the courts. The Alabama law has already been challenged, and it will likely end up costing at least as much, if not far more, to defend.

Both Jefferson County and the state of Alabama will need to bring in more revenue to cover their legal costs. But by driving immigrants, both documented and undocumented, out of the state, tax revenues will drop. Undocumented immigrants in Alabama paid an estimated $130 million dollars in state income, property, and sales taxes in 2010.

Alabama’s tax code is seemingly contradictory: The state taxes its residents on a lot less than any other state in the nation. Yet at the same time, Alabama has the highest tax rates for families at the poverty line. So now, when rates are likely to increase even further and increase the burden on the state’s most vulnerable residents, Alabama is doing its best to remove residents who pay into the system but almost never receive any services back.

In addition to higher state taxes, Alabamians are also likely to see higher costs for services. Residents of Jefferson County already pay sewer rates that are more than three times what they were in 1996, and these rates will only continue to rise as a result of the bankruptcy.

Alabama’s new immigration law will also contribute to increases in the cost of public utilities. Customer bases will shrink as immigrants leave the state, and public utilities companies, which operate on an economy of scale, will have to raise their prices. The provision in the law that requires public companies to verify the immigration status of their customers will require substantial additional labor that will need to be funded, most likely by passing that cost along to consumers.

At present, the Jefferson County Sheriff’s office is making do with refurbished cars and used vehicles because there is no money to replace them. The office roof leaks, and there are not enough funds to repair the poorly running HVAC system.

If the county is unable to find at least $40 million of new revenue, budget cuts will result in layoffs of sheriff’s deputies—and 101 deputies are currently scheduled to be laid off in 2012. Officers are already operating under tight budgets, and because the new immigration law forces them to become de-facto immigration agents, this will necessarily result in new costs and complications.

The chief deputy in Jefferson County has said that his deputies cannot start arresting those who are suspected of being in the United States without documentation because they simply do not have the funding. The state is requiring every sworn officer to undergo special training on how to enforce the law, but there is not yet any word on how much this 16,000-person training will cost, nor how it will be paid for. When a similar law was passed in Prince William County, Virginia, it was estimated that it would cost more than $3.2 million to implement.

Time for a motto change?

While Alabama’s elected officials may claim they are defending the rights of their constituents by passing a strict new immigration law, in reality they are damaging their communities and forcing residents to foot the bill.

This law will increase the cost of living at a time when the state is experiencing higher unemployment than the national average, and it will make communities less safe by diverting funds and police protection.

The residents of Alabama did not cause the Jefferson County bankruptcy, and they did not vote to pass H.B. 56, yet they are the ones who will ultimately suffer as a result. Perhaps it is time for Alabama to either rethink its state motto or actually start putting the rights of Alabamians before political posturing.

Sarah Jane Glynn is a Policy Analyst at American Progress.

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