BILL ANALYSIS                                                                                                                                                                                                    



                                                                       


           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  AB 1829|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 445-6614         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                 THIRD READING


          Bill No:  AB 1829
          Author:   Liu (D), et al
          Amended:  8/9/04 in Senate
          Vote:     21

           
           SENATE GOVERNMENTAL ORG. COMMITTEE  :  7-4, 6/22/04
          AYES:  Vincent, Cedillo, Chesbro, Dunn, Karnette, Murray,  
            Soto
          NOES:  Battin, Brulte, Margett, Morrow
          NO VOTE RECORDED:  Johnson, Machado

           SENATE APPROPRIATIONS COMMITTEE  :  7-5, 8/12/04
          AYES:  Bowen, Burton, Escutia, Karnette, Machado, Murray,  
            Speier
          NOES:  Battin, Aanestad, Ashburn, Johnson, Poochigian
          NO VOTE RECORDED:  Alpert

           ASSEMBLY FLOOR  :  46-32, 5/27/04 - See last page for vote


           SUBJECT  :    Public contracts:  services:  domestic workers

           SOURCE  :     California Labor Federation, AFL-CIO
                      American Federation of State, County and  
          Municipal
                          Employees
                      Communication Workers of America
                      Service Employees International Union


           DIGEST  :    This bill prohibits state and local governments  
          from expending state funds for:  (1) employee training in  
          foreign countries, (2) contracts for services with a  
                                                           CONTINUED





                                                               AB 1829
                                                                Page  
          2

          contractor or subcontractor that uses workers outside the  
          United States, as specified.  The bill authorizes a state  
          agency to waive this prohibition, with the consent of the  
          State Controller, under certain circumstances, such as when  
          the contract is necessary to respond to an emergency, as  
          defined.

           ANALYSIS  :    Existing law:

          1.Generally requires a state agency to comply with  
            specified procedures in awarding agency contracts.

          2.Authorizes a state agency to prohibit a person that is  
            convicted of committing specified crimes from bidding on  
            or being awarded agency contracts, as specified.

          This bill:

          1.Contains findings and declarations that the United States  
            has lost nearly three million jobs over the past three  
            years, with at least 15 percent outsourced to foreign  
            countries, with contractors and subcontractors using  
            taxpayer dollars to create jobs in foreign countries.   
            Also, that these funds should be used to create jobs in  
            California and the United States.

          2.Prohibits state agencies and local governments from  
            expending state funds on service contracts unless the  
            contractor or subcontractor certifies under penalty of  
            perjury in their bid that any work done under the  
            contract will be performed solely by workers within the  
            United States.

          3.Requires a services contract to be terminated for  
            noncompliance in the event that a contractor or  
            subcontractor shifts work overseas during the life of the  
            contract, and further requires that contractor or  
            subcontractor to forfeit contract payments equal to the  
            amount paid for the percentage of the offshored work.

          4.Prohibits the allocation or expenditure of state funds  
            for training employees located in foreign countries.

          5.Provides definitions for the terms "local government" and  







                                                              AB 1829
                                                                Page  
          3

            "state agency."

          6.Provides a described waiver procedure from the  
            requirements of this bill where the contract is necessary  
            to respond to an emergency for all of the following  
            reasons:

             A.   The provision of essential services would be  
               adversely affected.

             B.   The public health, welfare or safety is endangered.

             C.   No other contractor or subcontractor performing  
               work in the United States is immediately available.

          7. Provides a described waiver procedure from the  
             requirements of this bill where the contract is  
             necessary to perform a unique service for both of the  
             following reasons:

             A.   The particular service is deemed mandatory for the  
               purposes of the purchasing agency or local government.

             B.   No comparable domestically produced service can  
               adequately duplicate the unique features of the  
               service.

          8. This bill also specifies that these provisions do not  
             apply to a contract, if refusing to award that contract  
             violates the specific terms of federal trade treaties,  
             as specified.

          9. Provides that this act will not apply to seismic  
             retrofit work for state highway projects, as specified,  
             that is performed pursuant to a contract that is entered  
             into on or before January 1, 2006.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Senate Appropriations Committee:

                              Fiscal Impact (in thousands)








                                                               AB 1829
                                                                Page  
          4

           Major Provisions                2004-05     2005-06     
           2006-07   Fund  
          Services          Unknown, potentially $5,000+  
          annuallyGeneral
          Admin. costs                               Unknown,  
          probably not significant                     General
          State Controller                                Unknown,  
          potentially $360 annually                         General
                               depending on number of waivers

           SUPPORT  :   (Verified  8/12/04)

          California Labor Federation, AFL-CIO (co-source) 
          American Federation of State, County and Municipal  
          Employees (co-source) 
          Communication Workers of America (co-source) 
          Service Employees International Union (co-source) 
          Amalgamated Transit Union
          American Federation of Television and Radio Artists
          California Conference of Machinists
          California Independent Public Employees Legislative Council
          California School Employees Association
          California State Employees Association
          California Teamsters Public Affairs Council
          Consumer Federation of California
          Consumer Federation of California
          CWA local 9423 (San Jose, Monterey & Santa Cruz)
          CWA Local 9575 (Camarillo)
          Engineers and Scientists of California
          Graphic Communications Union, Local 583
          Hotel Employees and Restaurant Employees International  
          Union
          Industrial, Technical and Professional Employees Union  
          ITPEU, AFL-CIO
          Insurance Commissioner, John Garamendi
          International Association of Bridge, Structural,  
          Ornamental, and Reinforcing
              Iron Workers Local Union 155
          Motion Picture Costumers, Local 705
          Professional and Technical Engineers Local 21
          Region 8 State Council of the United Food and Commercial  
          Workers
          San Mateo County Central Labor Council
          SEIU Local 660







                                                               AB 1829
                                                                Page  
          5

          Sheet Metal Workers, Local 273
          Southern California Pipe Trades District Council 16
          Sprinkler Fitters and Apprentices, Local 483
          State Superintendent of Public Instruction, Jack O'Connell
          Sweatshop Watch
          Teamsters Local 481
          United Teachers of Los Angeles

           OPPOSITION  :    (Verified  8/12/04)

          American Council of Life Insurers
          American Electronics Association
          Association of California Insurance Companies
          Association of California Insurance Companies
          California Association of Health Plans
          California Association of Physician Groups
          California Bankers Association
          California Chamber of Commerce
          California Financial Services Association
          California Land Title Association
          California Manufacturers and Technology Association
          California Mortgage Bankers Association
          Department of Finance
          Information Technology Association of America (ITAA)
          Investment Company Institute
          Oracle Corporation
          Personal Insurance Federation of California
          Securities Industry Association
          Silicon Valley Manufacturers Group
          United States Chamber of Commerce
          Verizon

           ARGUMENTS IN SUPPORT  :    Supporters note that jobs are  
          leaving the United States at an increasing rate:  nearly  
          400,000 jobs have already moved overseas, including an  
          estimated 10 percent of all computer services and software  
          jobs by 2005.  Within five years, the top 100 financial  
          services firms expect to outsource nearly two million jobs  
          to other countries.  One recent study estimates that over  
          14 million service sector jobs are at risk of being  
          outsourced.

          Further, supporters state that the nation has lost between  
          2.4 million and three million jobs since 2001 - the longest  







                                                               AB 1829
                                                                Page  
          6

          sustained period of job loss since the Great Depression.   
          An estimated 15 percent (375,000 to 450,000) of those jobs  
          have reappeared overseas.

          In general, supporters argue that a ban on offshoring of  
          public service contracts would be beneficial for a number  
          of reasons:  the creation of jobs, reduction of social  
          services spending, and expansion of the tax base; retention  
          of jobs that Californians have already invested time and  
          money in training of; assistance to California-based small  
          and medium size companies who compete against larger  
          companies with the ability to offshore; preservation of  
          accountability for performance; and better protection of  
          private and personal information.

          Supporters also contend that similar local/national  
          preference laws have withstood constitutional scrutiny, and  
          that approximately 30 other states are considering similar  
          legislation.

          Finally, supporters agree with the following statement by  
          the author: "one thing is abundantly clear: states and  
          local governments should not use tax dollars to support the  
          offshoring of service and technology when so many Americans  
          are out of work.  The first, most sensible step is for  
          California to say 'not with our money,' and prohibit  
          companies from filling California State and local contract  
          services with overseas workers."

           ARGUMENTS IN OPPOSITION  :    Opponents point out that the  
          vast majority of jobs are not vulnerable to outsourcing, as  
          nearly 90 percent of U.S. jobs require geographic  
          proximity.

          Opponents also point to conflicting data that indicates  
          that the threat of offshoring is not as severe as  
          supporters contend.

          One study predicts that 3.3 million white-collar jobs will  
          move overseas by 2015, representing a shift of only 0.2  
          percent of all U.S. jobs per year.  Another opponent argues  
          that job gains are expected to compensate for those lost to  
          outsourcing, with a nationwide net gain of 22 million jobs  
          by 2010.  Similarly, a study recently commissioned by the  







                                                               AB 1829
                                                                Page  
          7

          Information Technology Association of America (ITAA)  
          predicts that in 2008, outsourcing will create 317,000  
          jobs, including 34,000 in California.

          Opponents also cite reported overall economic gains from  
          outsourcing, with the U.S. gaining about $1.13 for every  
          $1.00 spent on outsourcing to India.  Opponents also argue  
          that a larger threat to jobs is the cost of doing business  
          in California, which they estimate to be 30 percent higher  
          than in neighboring states.

          Furthermore, opponents contend that relatively few jobs are  
          actually vulnerable to outsourcing, and that the high costs  
          of doing business in California are a greater threat to  
          jobs than other factors.

          The California Chamber of Commerce states, "our opposition  
          is predicated on the belief that such protectionist  
          legislation is unconstitutional and could result in  
          retaliation by our foreign trading partners, and the best  
          way to address job loss in California is to create an  
          environment conducive to job growth and retention.  By  
          passing legislation that obstructs government agencies from  
          securing the contract with the lowest costs, the financial  
          situation of the state will become even more severe."

          Finally, opponents argue that a ban on offshoring public  
          contracts would:  be unconstitutional; violate  
          international trade agreements; incite retaliatory trade  
          restrictions by other nations; retard the natural evolution  
          of economic development and specialization of production;  
          and increase public contracting costs while reducing the  
          competitiveness and quality of services the public  
          receives.

           ASSEMBLY FLOOR  :
          AYES:  Berg, Bermudez, Calderon, Canciamilla, Chan, Chavez,  
            Chu, Corbett, Correa, Diaz, Dutra, Dymally, Firebaugh,  
            Frommer, Goldberg, Hancock, Jerome Horton, Jackson,  
            Kehoe, Koretz, Laird, Leno, Levine, Lieber, Liu,  
            Longville, Lowenthal, Matthews, Montanez, Mullin, Nakano,  
            Negrete McLeod, Oropeza, Parra, Pavley, Reyes,  
            Ridley-Thomas, Salinas, Simitian, Steinberg, Vargas,  
            Wesson, Wiggins, Wolk, Yee, Nunez







                                                               AB 1829
                                                                Page  
          8

          NOES:  Aghazarian, Bates, Benoit, Bogh, Campbell, Cogdill,  
            Cox, Daucher, Dutton, Garcia, Harman, Haynes, Shirley  
            Horton, Houston, Keene, La Malfa, La Suer, Leslie,  
            Maddox, Maldonado, Maze, McCarthy, Mountjoy, Nakanishi,  
            Pacheco, Plescia, Richman, Runner, Samuelian, Spitzer,  
            Strickland, Wyland
          NO VOTE RECORDED:  Cohn, Nation


          TSM:nl  8/17/04   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****