The California Senate on Monday passed a controversial bill that would ban state agencies from contracting out their services to companies that use overseas labor.

 

With the Assembly expected to concur, Gov. Arnold Schwarzenneger faces a choice between vetoing the measure to please business lobbyists or signing it to appeal to a populist demand for job protection. The governor's office said he had not taken a position on the bill, which cleared the Senate, 21-14.

 

"If this state wants to retain business and jobs in California, then we need to set an example by utilizing domestic business rather than sending work overseas,'' Liu said. "Jobs pump money back into the economy via income and sales tax revenue and reduce the number of people who need public assistance to survive. Offshoring may save money in the short term, but it will cost us more in the long run as more and more Californians find themselves jobless."

 

A coalition of business associations, led by the California Chamber of Commerce, has strongly opposed the legislation, saying it would ultimately cost the state more jobs than it would save because of a backlash by trading partners that see the move as protectionism. The group held a news conference earlier this month warning of  "unintended consequences"' should any of the cluster of anti-offshoring bills become law.

 

Two incidents last year sparked interest among California lawmakers to take action on offshoring. One was a threat by a medical-transcription subcontractor in Pakistan to disclose the confidential information of a University of California-San Francisco patient in a payment dispute. The other was the discovery that the food stamps program in California -- as in New Jersey and many other states -- uses customer-service call centers in India and Mexico that are operated by a contractor administering debit-card transactions.