The Economic Ramifications of SB 1070

By Karl Reiner

Unhappy with federal efforts and unfazed by the recession, the Arizona legislature decided to get the state involved in immigration policing.Texas 2  It ignored the fact that state and local enforcement of immigration laws might hinder the federal government's ability to set priorities and burden local police forces.

The state legislature crafted a broad and anti-illegal immigration measure. It was based on a model drafted by the Federation for American Immigration Reform.  Despite warnings from various groups regarding a host of unwelcome consequences, SB 1070 was signed into law in April 2010.

It can be argued by state officials that the economic damage caused by SB 1070 was unanticipated.  It was, however, a self-inflicted blow to an economy already deep in recession. It cost the state a loss in output in the range of $250 million, including around 2,000 jobs and tax revenue of approximately $9 million.

The tourism sector, the state's second largest industry, was hit hardest.  It has been estimated that as many as 100,000 Hispanics departed the state after SB 1070 was passed. The exodus affected Arizona's sagging housing market.  The frothy combination of recession and departures induced by the legislation drove vacancy rates to record levels and helped depress home prices.

Court cases were immediately filed by groups with civil rights and racial profiling concerns.  A federal injunction blocked most of the controversial provisions of SB 1070 from being implemented.  As the court battles raged, the state's legal costs climbed to over $1 million.

If you subscribe to the notion that any publicity is better than no publicity, then SB 1070 was a smashing success. The tough law brought loads of publicity to the state.  Arizona's sunny image was somewhat tarnished as much of the world got the impression that the state was becoming intimidating, uncaring and racist in hard economic times.

As the repercussions over civil rights issues grew, State Senator Russell Pearce, the main sponsor of the legislation, was voted out of office in a recall election.  Other states considering similar legislation closely watched as events unfolded in Arizona.  Many have subsequently decided not to pass immigration bills.

The Mexican government opposed SB 1070, warning its citizens about potential problems during visits to Arizona.  In Texas, theTexas 1 unemployment rate in November 2012 was 6.2% while in Arizona it was 7.8%. Texas is a large exporter to Mexico.  Its exports are projected to reach $92 billion this year. SB 1070 may have also given the wily Texans a subtle marketing advantage over Arizona suppliers.            

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