BILL ANALYSIS �
AB 2508
Page 1
Date of Hearing: April 17, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 2508 (Bonilla) - As Amended: March 29, 2012
SUBJECT : Public contracts: public health agencies.
SUMMARY : Prohibits the California Health and Human Services
Agency (CHHS) from contracting for services unless a contractor
certifies under penalty of perjury that the work will be
performed solely by workers employed in California.
Specifically, this bill :
1)Terminates a contract when a contractor uses out-of-state
workers, unless the contractor pays a penalty to the public
entity in an amount equal to the percentage of work performed
by out-of-state workers.
2)Prohibits the use of state funds for employment training for
employees in foreign countries.
3)Authorizes a public entity to waive in-state work requirements
for a particular contract up to a year, upon submitting a
written finding to the Controller that is not rejected within
30 days, declaring that either of the following are true:
a) The contract is an emergency necessity because the
ability to provide essential services would otherwise be
adversely affected, public health and safety would be
endangered, and the sole use of in-state workers is not
immediately available; or.
b) The contract is necessary to provide a unique and
mandatory service and in-state workers cannot adequately
perform the unique services.
4)Requires a public entity seeking a waiver to provide copies of
the written finding to the specified legislative committees
when submitting them to the Controller.
5)Requires a contractor to pay a penalty to the public entity in
an amount equal to the cost of work performed by out-of state
workers if the Controller rejects a finding after work is
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performed.
6)Defines "local government" to mean a county, city, city and
county, including a charter city or county, a special
district, or any other local or regional government entity.
7)Does not apply to contracts that are not awarded to
contractors who solely use in-state workers if the contract
would violate the terms of the Agreement on Government
Procurement of the World Trade Organization or any other
bilateral or regional free trade agreement that California has
consented to.
8)Does not apply to existing contracts, except those that will
be renewed upon expiration.
9)Makes legislative findings and declarations that tax revenues
should be used to create jobs in the United States and
California.
EXISTING STATE LAW establishes CHHS, which oversees health care
services, social services, mental health services, alcohol and
drug treatment services.
EXISTING FEDERAL LAW establishes the General Agreement on
Tariffs and Trade, a multilateral trade agreement, to reduce
tariff duties for trades between participating countries and to
promote free trade.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "Both
the Schwarzenegger and the Davis Administrations approved two
separate vendor contracts, for the food stamp programs
(CalFRESH), that subcontracted with out-of country call centers.
Currently, �one of the] call center�s] is located in Juarez,
Mexico, where workers there provide assistance to Californians
who receive California Work Opportunity and Responsibility to
Kids (CalWORKs) or CalFRESH benefits. Approximately four
million Californians are currently receiving CalFresh benefits
as a result of the ongoing recession and the increase in
unemployment and underemployment.
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"CHHS and the California Health Benefit Exchange (HBEX), both
administer public assistance and health benefit programs.
Public assistance and health benefit programs are funded for the
purpose of helping people who are unable to work or unable to
find work. State and federal funds to administer programs
designed to create jobs should be spent on creating jobs in
California, not in other countries."
Background . CHHS oversees 13 departments and one board that
provide a range of health care services, social services, mental
health services, alcohol and drug treatment services, income
assistance and public health services to Californians.
Approximately 33,000 people work for CHHS departments in
Sacramento, regional offices, and residential facilities serving
individuals with mental illness and people with developmental
disabilities. CHHS receives over $24.95 billion in General Fund
money and approximately $83 billion overall in both federal and
state funds.
Major CHHS programs include no-cost and low-cost health care
coverage for low-income Californians (Medi-Cal); income support
for the aged, blind or disabled (SSI/SSP); income support for
CalWORKs recipients, low-cost public health insurance (Healthy
Families) for children from working families. Other large CHHS
programs include CalFRESH, child welfare services, in-home
supportive services, support for the developmentally disabled,
foster care, mental health services, drug and alcohol treatment,
and vocational rehabilitation.
Support . According to the sponsor, the California Labor
Federation, "The economic crisis has put millions of
Californians out of work through no fault of their own.
Millions more are working less than they need to get by and want
full-time employment? Programs like CalFresh, Medi-Cal, Health
Families, and CalWORKs are state safety net programs to help
families through tough economic times. They provide income
support, healthcare, and training to keep out-of-work and
underemployed Californians from abject poverty? In 2014, three
million Californians will be newly eligible for Medi-Cal under
the Affordable Care Act. Millions more Californians will
receive subsidies to purchase health coverage through the HBEX.
In the time leading up to 2014, the HBEX will execute many
contracts for various functions, including call centers.
"Every job that contractors send offshore adds another
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Californian to the unemployment rolls and creates a drag on our
already struggling economy. State taxpayer funds should be used
to create jobs in the United States (U.S.) and in California.
Public dollars should especially not offshore jobs when those
dollars fund programs meant to create jobs and address problems
associated with joblessness.
"AB 2508 will ensure that state funds for public benefit
assistance programs will be used to create jobs in the U.S. and
in California. Specifically, this bill will direct CHHS and
HBEX, which both administer public assistance and health benefit
programs, to require all contractors to keep jobs in the U.S.
for the life of the contract. Contractors or their
subcontractors that offshore jobs associated with the contract
will face penalties equal to the amount the state spent on that
part of the contract."
According to the sponsor, Western Center on Law and Poverty
(WCLP), "AB 2508 keeps state contracted and subcontracted jobs
in California so that low-income residents have a chance to be
hired? WCLP recently learned that the previous Administration
outsourced the contract to provide CalWORKs and CalFRESH to a
vendor who is operating their call centers from Jurarez, Mexico?
It is only reasonable that when the state is creating jobs,
that the jobs are located within California so that program
participants, and all Californians, have a change to get the
jobs. AB 2508 will require that when these contracts go back
out to bid next time, that the state requires the successful
bidder, and their subcontractors, to keep the jobs in
California."
Opposition . According to the California Association of Health
Plans (CAHP), "�CAHP] represents 40 public and private
organizations that collectively provide health care coverage to
over 21 million Californians? AB 2508 would severely limit the
ability of HBEX to both complete its work in time for its
January 2014 opening and contract with qualified health plans to
provide health coverage to millions of newly eligible
Californians.
"AB 2508 bars HBEX from entering into a contract unless the
contractor can attest under the penalty of perjury that all work
conducted under the contract will be done solely by employees in
California. This requirement will cripple the ability of HBEX
to finish its work.
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"In addition, it is unclear that health plans who are key
contractors with HBEX will be able to meet the standard created
by this bill. While CAHP estimates that health plans generate
over 130,000 direct and indirect jobs in California, proving
that all work will be done by California employees is likely
impossible. In order to keep our administrative costs low,
health plans work with subcontractors in many areas to take
advantage of economy of scale."
Previous Legislation . AB 1829 (Liu) of 2004, would have
prohibited state agencies and local governments from using state
funds to contract for services, unless the contractor has
certified that the work will be performed within the U.S. This
bill would have provided for the termination of the contract,
criminal punishment, and reimbursement if the contractor fails
to comply. This bill was vetoed.
Double-referred . This bill is double-referred to Assembly Jobs,
Economic Development, and the Economy Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation (co-sponsor)
Western Center on Law and Poverty (co-sponsor)
Coalition of California Welfare Rights Organizations, Inc.
Opposition
California Association of Health Plans
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301