The fiscal warning California isn’t hearing

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OPINION – Every April 15, Californians take stock of what we owe and what our economy depends on. This year, that moment deserves a harder look.

That reflection should include something often overlooked: the millions of immigrants, including undocumented workers, whose contributions help power our businesses, sustain key industries, and generate billions in tax revenue.

It should also lead us to a clear conclusion: comprehensive immigration reform is essential. We need a modern system that aligns legal pathways with workforce needs and provides an earned path to legal status for long-term contributors. Without it, we are placing California’s economic stability at risk.

At the same time, our current immigration system is not working. It fails to provide legal pathways that reflect real workforce needs. This is not just a humanitarian issue. It is an economic one.

The answer starts with what is happening on the ground in restaurant kitchens, on construction sites, and in family-owned shops. Economic disruption does not always show up in the budget immediately. California’s general fund is holding for now, but future budgets will bear the cost. Our analysis suggests the state could lose as much as $278 billion in economic output, nearly 9% of GDP, without our undocumented workforce.

Income tax, sales tax, payroll tax, all of it depends on people working, earning, and spending. Undocumented immigrants alone contribute more than $23 billion in state and local taxes annually, directly funding schools, infrastructure, and public services. Immigrants make up nearly one-third of California’s population, undocumented workers roughly 8%.

California’s immigrant workforce is central to construction, agriculture, hospitality, food service, and retail. Immigrants make up three-quarters of California’s farmworkers, about one-third of whom are undocumented, and nearly two-thirds of the construction workforce, including a quarter who are undocumented. They underpin an agricultural sector that supplies a third of the nation’s vegetables and nearly three-quarters of its fruits and nuts, and a construction industry critical to addressing the state’s housing shortage.

When this workforce is disrupted, the impacts are immediate: housing projects stall, harvests go uncollected, and businesses cut back. These effects ripple outward into supply chains, local economies, and ultimately the state’s tax base.

Immigrants also own nearly 40% of California’s small businesses, including 11% owned by undocumented entrepreneurs. When these businesses lose workers or customers, taxable sales shrink. In mixed-status families, the loss of a primary breadwinner can cut household income by as much as 65%, a contraction that ripples through local businesses and public revenues.

There is also a longer-term cost. When fear drives immigrant parents from public systems and eligible students from education pathways, we lose future workers and taxpayers before they even begin.

With California already facing demographic headwinds, this loss is especially costly. Without immigration, the state would have lost over 100,000 people in 2025 rather than gaining nearly 20,000. Future workforce growth and tax stability will increasingly depend on immigrant participation.

At the same time, uncertainty in the H-1B visa system is dragging on California’s innovation economy. When a software engineer, researcher, or healthcare professional cannot get visa clarity, the business relocates, sometimes to another state, often to another country. California cannot afford to lose talent from both ends at once.

I come to this as a business advocate. The Bay Area Council exists to strengthen California’s economy and the companies and workers that power it. When the data from employers, workers, and communities all point in the same direction, that is not a political argument. It is an economic signal we cannot ignore.

This is not a transient population. Nearly two-thirds of the state’s undocumented immigrants have lived here for over a decade, many without a legal pathway forward. That is why comprehensive immigration reform must be the priority, modernized legal pathways tied to workforce demand, paired with a fair, earned path to legal status.

In the meantime, policymakers should evaluate enforcement decisions against their real economic impacts, provide clarity for employers and workers, and avoid actions that unnecessarily destabilize key sectors of our economy.

The numbers tell a clear story. The question is whether we are willing to act on it.

John Grubb is the chief strategy and growth officer of the Bay Area Council.