BILL ANALYSIS �
AB 2508
Page 1
Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2508 (Bonilla) - As Amended: May 2, 2012
Policy Committee: Business and
Professions Vote: 6-1
Jobs 4-1
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill prohibits work on certain state contracts from being
performed outside of California. Specifically, this bill:
1) Requires contractors for call center services for
CalWORKS, CalFresh, Medi-Cal, Healthy Families, and the
California Healthcare Eligibility, Enrollment and Retention
System to certify, under penalty of perjury, that the
contract and any subcontract will be performed solely with
workers employed in California.
2) Stipulates that, for a violation of the above, the
contract shall be terminated and the contractor or
subcontractor shall pay a penalty to the state in the
amount paid by the state for the percentage of work
performed by workers outside of California.
3) Allows a state agency to waive the requirements in (1)
for up to six months by submitting a finding to the State
Controller that an emergency, as defined, exists, and the
Controller does not reject the finding within 30 days.
4) Allows a state agency to waive the requirements in (1)
for up to one year for a contract already in force by
submitting a finding to the Controller that an emergency
exists, and the Controller does not reject the finding
within 30 days.
5) Requires the agency's findings, per (3) and (4), to
include the estimated number of jobs effected, the duration
AB 2508
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of employment, and salaries of noncompliant workers.
6) States this contracting prohibition does not apply if
refusal to award a contract on the above basis would
violate the Agreement on Government Procurement of the
World Trade Organization or any other free trade agreement
to which California has consented.
7) Stipulates the prohibition does not apply to a contract
currently in place if it would violate the contract terms.
FISCAL EFFECT
1)Limiting call center contracts to California, in lieu of
providing these services in lower cost states or countries,
will likely increase state costs for these services. These
additional costs are unknown, but could be in the low millions
of dollars annually.
The Department of Social Services currently has a contract
outside of California for the EBT project, which automates the
issuance, delivery, redemption, settlement and reconciliation
of CalFresh and CalWORKS program benefits. The annual cost of
this contract for 2011-12 is almost $24 million, but in
addition to a call center, this contract includes vendor
maintenance and operations costs for the EBT system.
The Department of Health Care Services contracts for two call
centers, both in California; the Medi-Cal Dental Services
Division contract will cost $17.4 million for 2012-13 and the
Medi-Cal Managed Care Division contract will cost $4.4 million
next year.
2)Additional costs per (1) will be offset to some extent by tax
revenues associated with the additional employment and related
economic activity and potential reduction in the cost of
public benefit programs.
COMMENTS
1)Purpose . 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 centers is located in
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Juarez, Mexico, where workers there provide assistance to
Californians who receive CalWORKs or CalFRESH benefits?Public
assistance and health benefit programs area funded to help
people who are 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."
This bill is co-sponsored by the California Labor Federation
and the Western Center on Law and Poverty.
2)Opposition . Health Net indicates that its call centers, which
support both its commercial and Medi-Cal and Healthy Families
programs, are located in California, but Health Net is
concerned with the limitations on the location of
subcontractors. Health Net indicates that some of the services
supporting the call center, such as information technology,
training, and web design are provided by its employees or
subcontractors that in some cases are located out of state.
The sponsor indicates, however, it is not their intent for the
bill to cover contracts such as the state's contract with
Health Net, and seems amenable to clarifying language on this
point.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081