Gov. Arnold Schwarzeneger

The California Senate on Aug. 23 passed a bill that would ban state agencies from contracting out their services to companies that use overseas labor, according to a report in the San Jose Mercury News.

With the Assembly expected to concur, Gov. Arnold Schwarzeneger faces a choice between vetoing the measure to please business lobbyists or signing it to appeal to a populist demand for job protection, the report said.

The report quoted the governor’s office as saying he had not taken a position on the bill, which was cleared by the Senate 21-14.

Passage of SB 1829, sponsored by Assemblywoman Carol Liu, D-Pasadena, makes California one of the leaders in a nationwide movement seeking state legislative remedies against offshoring of government services, the report added.

Liu was quoted as saying that if this state wants to retain business and jobs in California, then they need to set an example by utilizing domestic business rather than sending work overseas.

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, he added.

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, San Jose Mercury reported.

California is one of 34 states where legislation has been introduced that would restrict work on state agency contracts from being performed overseas, or impose regulations on offshoring practices to safeguard the security of medical and financial information. Legislation in two other states passed but was vetoed, the report said.

As many as 12 bills have been introduced to the California legislature since the beginning of the year relating to offshoring, and Liu’s bill was the first to come up for a vote in the Senate. It bans state contracts from being performed abroad, and forbids state and local governments from spending state funds for employee training in foreign countries, the report added.

Offshoring became a hot political issue during the 2004 presidential campaign, as critics complained of laggard job growth because of the Bush administration’s economic recovery plan. Jobs have been “offshored” in the manufacturing sector for decades as other countries became more competitive with lower wages, but a political crisis emerged once well-paying jobs in the service sector –– including software and computer engineering jobs in Silicon Valley –– came under threat, San Jose Mercury News report said.

(Compiled from news dispatches by Nishant Arora)