The McCain plan calls for a guest worker program and allows the estimated 10 million to 15 million illegals already in the U.S. to apply for legal status after paying a $2,000 fine and going through criminal and medical background checks.

A source familiar with Hayworth's effort said illegals already in the U.S. would face stiffer sanctions than under the McCain-led effort, which also is backed by Sen. Edward Kennedy, D-Mass.

The McCain-Kennedy bill and a conservative proposal favored by Arizona Sen. Jon Kyl also would impose fines and sanctions against employers who hire undocumented workers.

"They're toast," said one source of what scofflaw employers face under Hayworth's proposal.

There also could be provisions in the Hayworth model that link foreign aid to Mexico's efforts to stem the tide of illegal immigrants and organized crime activity along the border.

Hayworth, a Republican representing Scottsdale and Tempe, has brought up the idea of denying U.S. aid to Mexico before. There is plenty of frustration with Mexico City's encouragement of illegal migrations and inability to control drug cartels that ship crystal meth, marijuana and cocaine into the U.S.

Hayworth is expected to push forward his immigrant plan in the coming weeks. Details and cosponsors of the effort are being worked out.

The pending legislation will be the latest federal and state effort to go after employers who illegally hire undocumented migrants.

Business groups support a guest worker program as well as increased border resources but oppose what they describe as "draconian" sanctions against employers.

"We agree that comprehensive border security and immigration reform must enhance our homeland security; create a viable guest worker program to meet our nation's growing labor needs; and provide a process to settle the status of the 11 million undocumented living in the United States." said Farrell Quinlan, vice president of the Arizona Chamber of Commerce & Industry.

Business interests, including the state chamber, support the McCain-Kennedy guest worker measure over plans such as Hayworth's. Key state industries -- including tourism, construction and farming -- rely heavily on undocumented migrant labor.

However, public opinion polls show voters in Arizona and nationally want a get-tough approach over business leaders' favored solutions to the illegal immigrant problem.

"J.D.'s approach -- like that of Sen. Jon Kyl's -- is in line with the thinking of most Arizonans," said Stan Barnes, a business lobbyist and head of Phoenix-based Copper State Consulting Group.

Glenn Williamson, president of the Canada Arizona Trade Council, said he has been discussing trade and border matters with Hayworth and wants to make sure economic ties between Canada and the U.S. are not harmed by tighter controls with Mexico.

Williamson worries that conservative efforts to tighten the border with Mexico will hurt trade with Canada. The two countries are Arizona's top trading partners.

The border situation and illegal immigrants are a huge economic and political issue in Arizona and other Southwestern states.

Arizona Gov. Janet Napolitano and New Mexico Gov. Bill Richardson -- both Democrats -- issued state of emergency orders for the Mexican border in August to help fight drug cartels and immigrant smugglers.

Napolitano has been critical of the Bush administration for not moving fast enough to secure the border and helps states with the costs of housing illegals in state prisons. That includes worries about the federal security presence at Phoenix Sky Harbor International Airport and the Phoenix bus station.

Spokeswoman Pati Urias said Napolitano supports the McCain-Kennedy guest worker idea.

Conservative Republicans have faulted Napolitano, McCain and business groups for supporting guest worker programs and opposing a ballot question last year that prohibits illegals from receiving state benefits and services.