BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1829|
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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
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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
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"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)
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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
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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
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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
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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
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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
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