BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2508|
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THIRD READING
Bill No: AB 2508
Author: Bonilla (D), et al.
Amended: 8/21/12 in Senate
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMM. : 8-4, 6/26/12
AYES: Wright, Calderon, Corbett, De Le�n, Evans,
Hernandez, Padilla, Yee
NOES: Anderson, Berryhill, Walters, Wyland
NO VOTE RECORDED: Cannella
SENATE APPROPRIATIONS COMMITTEE : 5-2, 8/16/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
ASSEMBLY FLOOR : 50-24, 5/30/12 - See last page for vote
SUBJECT : Public contracts: public health agencies
SOURCE : California Labor Federation
Western Center on Law and Poverty
DIGEST : This bill prohibits a state agency authorized to
contract for public benefits programs from contracting for
services provided by a call center that directly serves
applicants for, recipients of, or enrollees in those
programs, and that the work will be performed solely by
workers employed in California.
ANALYSIS : Existing state law establishes California
CONTINUED
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Health and Human Services Agency (CHHS), which oversees
health care services, social services, mental health
services, and 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.
This bill:
1. Prohibits a state agency authorized to contract for
public benefits programs from contracting for services
provided by a call center that directly serves
applicants for, recipients of, or enrollees in those
programs, a contractor certifies that the work will be
performed solely by workers employed in California. Any
contractor that knowingly provides false information in
the certification required by this provision of the bill
shall be subject to a civil penalty in any amount of up
to $10,000, in addition to any other remedies available
to the state agency. An action for a civil penalty
under this provision may be brought by any public
prosecutor in the name of the people of the State of
California.
2. Terminates a contract when a contractor uses workers not
employed in California and requires the contractor to
pay a penalty to the state agency in an amount equal to
the percentage of work performed by workers not employed
in California. The penalty authorized is to be in
addition to any other applicable penalty, including, but
not limited to, the penalty provided in #1 above.
3. Exempts a state agency from in-state work requirements
for specified call centers if the Governor waives those
requirements during a state of emergency.
4. Defines "call center" to mean a building, facility, or
operation where customer or client services or
assistance is provided by telephone, fax, e-mail, text,
or Web-based interaction.
5. Defines "public benefit programs" to mean California
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Work Opportunity and Responsibility to Kids (CalWORKs),
CalFRESH, Medi-Cal, Healthy Families, and the California
Healthcare Eligibility, Enrollment, and Retention
System.
6. Does not apply to:
A. 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
which the State of California has consented to;
B. Existing contracts, except those that will be
renewed upon expiration; or
C. Contracts entered into between a state agency and
a health care service plan, a specialized health care
service plan regulated by the Department of Managed
Health Care or a disability insurer or specialized
health insurer regulated by the Department of
Insurance, or to the contractors and subcontractors
of those plans or insurers contracting with a state
agency.
7. Makes legislative findings and declarations that tax
revenues should be used to create jobs in the United
States and California.
8. Specifies that this bill is not to be construed so as to
not conflict with, and be applied consistent with,
federal law.
Comments
According to the author's office, "Both the Schwarzenegger
and the Davis Administrations approved two separate vendor
contracts, for the �CalFRESH] food stamp programs, 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 CalWORKs or CalFRESH benefits. Approximately four
million Californians are currently receiving CalFRESH
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benefits as a result of the ongoing recession and the
increase in unemployment and underemployment."
Major CHHS programs include income support for CalWORKs
recipients, low-cost public health insurance (Healthy
Families) for children from working families, Medi-Cal, and
CalFRESH.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
By requiring state agencies to only contract for call
center services that will be performed in the state,
this bill will potentially increase costs to state
agencies. Because wages and other costs tend to be
higher in California than in surrounding states or
countries, the cost of call center services provided in
California is likely to be higher than services provided
in lower cost states or countries. The size of this
impact is unknown and would depend on future contract
proposals.
To the extent this bill requires jobs to be located in
California, this bill will increase state tax revenues.
According to the Board of Equalization and the Franchise
Tax Board, the average private sector job is responsible
for about $3,600 per year in General Fund tax revenue.
The net fiscal impact of this bill is uncertain. Whether
the net fiscal impact to the state is positive or negative
would depend on the relative cost difference between
providing services in California versus other states or
countries.
For example, the state's Medi-Cal program is generally
funded with 50% General Fund and 50% federal funds. If the
cost gap for call center operations between California and
a neighboring state is more than $7,200 per job per year,
the state would save more money contracting for out of
state services ($3,600) than it would gain from General
Fund tax revenues. If the cost gap is less, the state
would receive more in taxes than the cost savings. For
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programs with greater state funding (or which are funded by
block grants) the cost gap at which the state would break
even would be narrower.
SUPPORT : (Verified 8/20/12)
California Labor Federation (co-source)
Western Center on Law and Poverty (co-source)
AFSCME
California Community Colleges CalWORKS Association
California School Employees Association
Health Access of California
Jericho
SEIU Local 1000
ARGUMENTS IN SUPPORT : The California Labor Federation
states, "Keeping call center jobs in California has a clear
economic benefit to the state. A 2012 report by the UC
Berkeley Center for Labor Research and Education found that
for every $1 million the state spends on call center
services in California, economic output would increase by
$2.1 million (economic multiplier of 2.06) in the state and
$69,000 in state tax revenue would be collected. In
addition, 16 new jobs would be created, including direct
call center jobs, call center supplier jobs and jobs in the
local economies where call center employees live and shop.
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. The best strategy to restart California's
struggling economy is to put people back to work. The
state can help create jobs by leveraging the billions of
public dollars already spent on goods and services in order
to create jobs in California. Many state agencies already
include in their Request for Proposals (RFPs) provisions to
keep jobs in California and the United States, and
negotiate contracts with vendors to retain those jobs
in-state. The work of these agencies is commendable, but
to rebuild California's economy, the state needs an
explicit policy of prohibiting the offshoring of jobs in
public contracts to create uniformity across agencies and a
floor from which agencies can negotiate better contracts.
A good place to start is by bringing back public benefit
call center jobs that have been offshored by previous
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administrations."
ASSEMBLY FLOOR : 50-24, 5/30/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
Chesbro, Dickinson, Eng, Fong, Furutani, Galgiani, Gatto,
Gordon, Hall, Hayashi, Roger Hern�ndez, Hill, Huber,
Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza,
Mitchell, Monning, Nestande, Pan, Perea, V. Manuel P�rez,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Beth Gaines, Garrick, Grove, Hagman, Halderman, Harkey,
Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell,
Nielsen, Norby, Olsen, Silva, Smyth, Wagner
NO VOTE RECORDED: Davis, Feuer, Fletcher, Fuentes, Gorell,
Valadao
DLW:k 8/21/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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