States take look at outsourcing, but no support for bans so far

Worries about outsourcing have state lawmakers proposing bills by the dozen and governors issuing orders aimed at keeping jobs that are tied to state government at home.

But none of the proposed bans have become law, with election-year concerns over unemployment colliding with fears that free trade could be damaged by government interference.

Critics say the measures are often veiled political attacks on President Bush that have little chance of passage because they would be economically damaging in the long run. Supporters so far have made little progress, even though 35 states are considering measures that would sharply restrict or ban outsourcing.

Meanwhile, governors in Michigan, Minnesota and North Carolina have issued orders on their own to try to rein in the practice, though they've shied away from hard and fast rules.

And last month, North Carolina legislators agreed to spend $1.2 million to bring 34 jobs back from Mumbai, India, to rural North Carolina to handle phone calls regarding child support, part of a $25-million contract with Arizona-based eFunds Corp.

Their action followed an order from North Carolina Gov. Mike Easley, a Democrat, who told state agencies to re-examine contracts with private companies for outsourcing.

Last year, Indiana's state government canceled a $15-million contract with an Indian consulting firm that would handle some calls in India. The bid has been reopened.

Michigan Gov. Jennifer Granholm, a Democrat, and Minnesota's GOP Gov. Tim Pawlenty both issued orders last month requiring state agencies to encourage and pursue contracts with companies that keep jobs in their state and in the United States.

"When it makes sense, we should do all we can to direct (the state's) buying power to serve American and Minnesota workers," Pawlenty said when he issued his directive.

Much of the legislation in state capitals from California to Alabama to Connecticut would seek to prohibit state contracts with companies that rely on overseas workers; others seek to discourage the practice through tax credits.

"Lawmakers are starting to get more and more of an understanding of how outsourcing is affecting everyone," said California state Sen. Liz Figueroa, a Democrat who wants a ban on state contracts that rely on offshore labor.

She also seeks to make larger companies report any outsourcing, and also to limit medical or financial information being processed overseas.

Figueroa remains convinced her ban will become law: "Some pieces of legislation, it just takes time for people to understand and comprehend. That's the way it should be."

Critics say the arguments are misguided, because the free flow of trade ends up creating more American jobs. Supporters are just aiming to score political points, they say.

"Some of the Democrats nationally have gotten together to play this in each state so it becomes a presidential issue," said Connecticut's budget director, Marc Ryan. "The punitive approach is foolish. You're cutting off your nose to spite your face."

A Detroit business group argued more obstacles will only drive companies away from doing state work and force up prices; a Republican state legislator from Colorado helped kill a proposal in committee.

"I just really believe that trade barriers are economically counterproductive," said Colorado state Senate President John Andrews. "In the short run, you are burdening the taxpayers of the state with higher costs."

Anti-outsourcing legislation could violate the Constitution and international trade agreements, according to a new study by the National Foundation for American Policy, a nonpartisan group that works on trade.

The approach so far, at least by the governors, echoes the in-state preferences of the "Buy America" efforts that gained support in the 1970s amid worries of Japanese economic dominance, said John Thomasian, director of the National Governors Association Center for Best Practices.

"That's a reasonable middle ground," Thomasian said. "Most governors are really loathe to interfere with free trade, even while they anguish over job losses."

The dilemma isn't easily resolved. Kansas lawmakers were outraged when they learned that Kansans' calls about food stamps would be handled in India, and wrote a ban into this year's budget.

Then they learned the state would pay $640,000 more, or a 38 percent increase, for the calling center contract. Budget negotiators scrapped the provision.

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On the Web

National Conference of State Legislatures: www.ncsl.org/standcomm/scecon/offshorepage1.htm