If California were a country, here would be the solution to the problem of illegal immigration from Mexico. Admittedly, it is a back-of-the-napkin plan, but nonetheless illustrates a way of thinking about the issue.
The plan has three parts: First, a penalty not only with a path to citizenship but a path for immigrant's children into the middle class. Second, securing the border. Third, jump-starting Mexico's economic development by helping modernize its oil industry.
1. As a penalty for being in the US illegally, immigrants who register would have to pay a $5000 fine, with an immediate $1000 down payment, and obtain certificates in English and civic knowledge before being granted full citizenship.
The $1000 would go immediately to help decrease the state budget deficit of $20 billion. A portion of the rest collected over time would go to the general fund to pay for California's social and medical services as well as K-12 education which immigrants and their families generously use; a portion would go into an education savings plan the immigrant's children could draw from for higher education and a portion would go to paying the costs of securing the border.
It is essential as part of any immigration overhaul that a path from being working poor to the middle class through education is included, lest southern California immigrant neighborhoods come to resemble the poorer parts of Mexico.
Once citizens, immigrants would be on the formal tax rolls, adding heft to revenues needed to cover the state's costs, including the large pension liabilities of the state's public employees.
If half or so of the 11 million illegal immigrants in the country reside in California, there are tens of billions in tax revenue at stake.
2. To prevent such a plan from becoming a precedent that would attract further illegal immigration instead of stem it, the border would have to be secured. This would also help stem drug violence spilling across the border and ward against terrorism.
3. The pull factor of the California economy will never cease to be a magnet unless there is more prosperity in Mexico. Mexico has huge oil reserves unexploited because it has failed to modernize PEMEX, the state oil company, and thus does not have the technology for deep sea drilling where reserves are plentiful.
Understandably, given its history, Mexico does not want American oil companies taking charge of its national patrimony. But why doesn't Mexico's government invite the Norwegian, Brazilian and Chinese state oil companies -- which have the technology -- to take an equity stake in PEMEX? To cover the long-term debt it would need to float for modernization, Mexico could create 30-year bonds backed by oil revenues (not oil, which is the national patrimony) and guaranteed by the state, thus enabling California's huge public pension funds such as STRS and PERS to purchase them.
Getting Mexico's oil out from under the ground and sea would generate huge revenue that can be spent to spur growth and development in that country, provided the rule of law prevents too much corruption from squandering the money. As more oil flows from Mexico to the US, it would reduce US dependence on Middle-East oil.
In short, from a tax jurisdiction and economic growth standpoint, immigrants are an asset, not a liability, especially if California's education system is primed as a route of upward mobility. Mexico is a country with vast natural resources that can stimulate development and keep Mexicans at home if we work together to that end instead of ignore the economic dynamics behind immigration.